tv Public Affairs CSPAN November 19, 2012 12:00pm-5:00pm EST
that is not going to be a hard argument. we have to make it. i believe you will see what you're seeing here, the idea that made as an exceptional nation. our children will inherit what they deserve to inherit. , the single greatest nation in the history of all mankind. i'm grateful you give us the opportunity. this has been limited. i'm grateful you gave me the opportunity to address you on these topics. i feel so passionately. i see this as an opportunity to do our part in this history.
people say thank you for what you are doing. i feel guilty. i can never do for this country what it has done for me. i do not know where i would be of my parents have not come to america. i doubt whether i would be in a place like this. perhaps i would be like this. wrong with being a bar tender. i believe there are millions of people that want that for their children and grandchildren in america. our job is to make it easier for them to do that.
and government can play a role. the governor is an example of what government can do in the state. i pray god will give me an opportunity to be part of that in washington d.c. thank you for the opportunity to speak to you on these topics. [applause] thank you. thank you. thank you. i am going to say, i am relieved there were no hecklers. the last thing is what we are here to do is to celebrate the governor's birthday. i understand mackenzie is going to sing. is that right? everybody is coming? great. we want to hear them.
thank you very much, girls. first of all, i want to thank you all for coming tonight. i want to especially thank bridget, mackenzie, sofia and alexis for leading the birthday songs. you girls are great. he did a wonderful job. i am proud of you. i want to thank my wonderful wife chris and my entire family, my two sons and daughter and their spouses, and the extended family, all of the people that have been such a wonderful support system for me. i also want to thank another special family. the crantz family who own adventure land. this is a great example of a family-owned business that provides wonderful, recreational opportunities for people of iowa in thousands and thousands of visitors that come here. you know i have a nostalgic
feeling every time i come back to adventure land because we had my first birthday party, my first 39th birthday party here, and many others after it. and i love coming back to adventure land. this is a special place. and i think a lot of other people feel that same way because they have a lot of wonderful experiences at this great place. adventure land the crantz family is an example of a wonderful iowa success story. thank you for your generosity. obviously, i am proud we could have this event at adventure land again this year. i know how important this park is or tourism and the benefits it provides to our economy. i especially want to thank the cochairs of this event, and they did a fantastic job. patty and jim, and diana and john smith, thank you for making this such a great success. thank you. and i also want to acknowledge the steering committee, christie and jeff, sandy and gary, jackie and bob, joyce and arnie, janet and mark jacobs, jennifer and chuck, bruce and debbie and doug
thank you very much. i want to thank the wilder side band for their entertainment and for our baker, linzie of live, love, bake for delicious birthday treats tonight. this is a wonderful cake they put together. thank you very much. one of the big reasons for having such a great success is our inspirational speaker, marco rubio. what a wonderful message he has
and what a great example of the american dream. and he is an inspiration to me and so many others to continue to focus on a limited government and empowering the private sector to grow opportunities for all of our people. tonight's event, with this event, we have turned the page and we look towards the future. i have always been one that learned that you never fight the last battle or a look at the last campaign. you look to the future and learn from mistakes of the past to do a better job in the future. and marco rubio is the kind of inspirational leadership that is going to point us in the right direction.
[applause] lieutenant governor kim reynolds and i were honored to be selected by the people of iowa two years ago to lead this great state. we came to office with ambitious goals. we inherited a financial mess, not as big as the federal government, but we have a lot of one time money that is used for ongoing expenses. we had a projected deficit in the hundreds of thousands of dollars. actually, hundreds of millions
of dollars. this is government. and we have a lot of challenges. but i am proud to say we came in with ambitious goals to reduce the size and cost of government, to focus on bringing quality jobs to our state, reducing the tax and regulatory burdens and making iowa more competitive. we have been proud to work on this every day. you know it is great to lead a state like this where you have ambitious, hard-working people and a population that gets more diverse every year. the lieutenant governor and i
are working to see that each and every iowan has an opportunity to achieve the american dream. and we are going to do that by getting government out of the way it and giving it the business community the opportunity to grow and realize their dreams and the individual iowa worker the opportunity for the education they need to have the skills for those great jobs that are going to be created in the state in the future. [applause] we want those new startup businesses to succeed and grow and our state here we want to ensure all iowans that they have the opportunity to be part of the healthiest state in america by taking ownership of their own health and working together with us to reduce the cost and increase the accessibility for health care for iowans. we will provide the best educational opportunities for our children. and i am excited and hopeful about the future. you've heard about some of the things that happened recently. but we have just begun. and if we continue to reduce, things like the commercial and industrial property tax, and make iowa more competitive, we will have more start up businesses and more growth in the future. we are not satisfied with 5.1% unemployment. we'd like to be were north dakota is at 2.7%. [applause] we have agriculture, but they have agriculture and oil. but we are not going to let us a deterrent -- let that deter us. we had a good conversation with the governor of north dakota who shares our basic philosophy about the way we grow our economy and make our state more competitive. i want ever want to know how
much i appreciate your personal support and the financial sacrifice you have made to give me this great honor of serving you. and i promise i will work each and every day to continue to earn your support and confidence and to make this state the best that it can be. we want -- iowa is a great state with a lot of wonderful people, but i believed our future can be even greater because of what you are doing. and i am just honored and proud to be part of this wonderful team that we have been able to put together to lead this state. so with that, i just want to end by saying, thank you. god bless you. and i guess enjoy the music. and at least have one of these cupcakes. and thank you for your support. i appreciate it. thank you very much. [applause]
>> president barack obama is continuing his asian trip today. he arrived in cambodia and met with the prime minister. he is making the first visit by a u.s. president to cambodia appeared he went straight from the airport to a meeting with the prime minister that officials described as "ten se." emphasizes concerns about cambodia's human rights situation he is here in
washington speaking in about half an hour and 40 minutes at the brookings institution. tonight we're calling to have live coverage for you. ted koppel talks about the future of network news. he is interviewed by marvin. they will touch on the network is caused by the digital age. we have it 8:00 eastern. >> the mindset of the world well into the mid-1990s was that wireline access was stepped on polls are buried in the ground. it was the key to understanding competition. the intriguing part of the wireless story is how very he people inside the industry, but that is why this report cannot
the way it did. it was not just judge greene who did not understand the potential of wireless. it was the entire industry. what turned out to be the case was the hope that some people had to ecotage have a robustly competitive, fixed line access for half a dozen companies are offering telephone service over a wire. this vision was mistaken. >> was it a bad idea to break up at&t? they discussed the pros and cons tonight at 8:00 eastern on c-span2. >> as the way for the head of the nasdaq stock exchange to talk about the fiscal cliff,
let's bring you a discussion from this morning's "washington journal." will talk about the upcoming tax increases and spending cut starting to go into effect in january. this a be the chief auditor. the he is now the founder. you have been watching this process for a long time. how would you describe this conditions? >> we have two problems. american people have heard a lot about the fiscal cliff. we need to avoid the fiscal cliff.
we need to recognize that is a symptom and not the disease. the disease is a large and growing federal deficit that lies ahead. we have to avoid the fiscal cliff and build a bridge to avoid the fiscal abyss. host: what is your level of confidence the fiscal cliff can be avoided? guest: i'm cautiously optimistic. last week was rather disappointing. i think both sides really do want to avoid it. we need to recognize you cannot do a grand bargain in a lame- duck session. we ought to do something to demonstrate that we are serious about fixing these structural problems. we need to separate the wheat from the shaft between what should be extended and what should not be. the real sticking point is what happens with taxes on the wealthy. there are ways to increase the effective tax rate on the wealthy without increasing the marginal tax rates. hopefully they will come to agreement on that with full comprehensive tax reform. host: the phone numbers are on the bottom of the screen for david walker.
we are talking about the fiscal cliff and the national debt. we have separate phone lines for democrats and republicans and independents. we look forward to hearing from all of you. we will also get some tweets for david walker, founder and ceo of the comeback america initiative. guest: it's a 501 (c)(3) nonprofits that focuses on citizen education engagement with regard to federal, state, local fiscal challenges and trust to come up with non- partisan solutions that ought to be able to gain bipartisan support to put our finances in order. host: we have been talked about the deadline at the end of december. what is a short-term solution to avoiding the fiscal cliff? guest: there are certain things scheduled to expire that should be allowed to expire. the 2% payroll tax deduction. that was intended to be a
temporary stimulus. it also set a bad precedent. 99 weeks is enough for unemployment benefits. we have extended that several times and it was appropriate, but that's enough. the balance of the big items can be deferred for nine months to a year to give time for congress to engage the american people and do the work inside the beltway to get a grand bargain. social insurance reforms, tax reforms, and a program of defense and other spending reductions. host: what kind of danger is not
acting poorly on all these items? guest: the big danger of not acting on the fiscal cliff is that consensus opinion is if we cut spending that dramatically, if we end up increasing taxes that dramatically, that it would put us back into recession, it will exacerbate our unemployment and underemployment process and nobody wants that. there are things that can be done to smooth it a little so it's not quite as sudden. but it's real. the others think people forget about is if you want to endorse unscrambling the egg, you better have 60 votes in the senate or you better have a package that will end up reducing the deficit, because that's the only way you can use this procedure called budget reconciliation. but if you are trying to reverse tax increases or you are trying to reverse spending cuts, those things increase the deficit. host: before we get to calls come back to your use of the word of this, here's a headline recently --
take us deeper. guest: we have a short-term challenge which is the fiscal cliff, the tax cuts, the schedule, probably the tax increases that are scheduled, the expiration of tax cuts, and the schedule sequestration, and other spending cuts. that is short-term. the structural is known demographic trends, 10,000 people a day are retiring and will over the net 17 years. all care costs are still growing much faster than inflation and the economy. our tax system is outdated and needs to be restructured. those create large and growing deficits into the future. it's not a long-term anymore. it is the longer-term. we see it. these are going to be with us a long time and we need to recognize that reality sooner rather than later. host: first call from philadelphia, frank on our republican line. caller: good morning. i wanted to know if you -- whether or not the president
will have to lower his threshold to people that are probably making around $200,000 a year. i don't think what he said during his campaign is going to cut its to get us over the cliff. guest: i think over time we will have to look and help to define what middle-class is and what will see is. one of the frustrations i have, as well as many americans, is the cost of living is different in different parts of the country. it costs a lot more to live in the tristate area of new york, new jersey, connecticut than it does in southwestern virginia. in the final analysis i believe we need comprehensive tax reform that will do several things. it will get more people paying income taxes under more progressive tax system. right now 46.4% don't pay income tax. it would increase the effective tax rate of about the, but not getting new rates or new
alternative minimum taxes. it would minimize the burden on middle-class. the gap is so great, there's going to have to be a component of revenue. i think it's about 3-1 spending reductions to revenue. the jury is out on how they will achieve revenue increases. host: meg is on the democratic line from trenton, new jersey. caller: i would like to know what you think about the possibility of having some of the benefits for people who are on social security or medicare. there are a lot of things that people are allowed to ask for as -- as far as hair-care and nail care, that they need to look a certain way to find work. i am disabled and i decided to buy myself will scooter so i could get around, because i could barely walk. i had been almost housebound for almost a full your years. i decided to take money out of the social security i'm getting to make payments on the scooter rather than to have medicare pay for it.
it is really offensive to someone like me, and 47%er by someone like mitt romney was as we are entitled. i am ashamed of having to accept public assistance, but i don't have a choice because i'm not able to work. guest: we have to recognize a significant majority of americans pay more in payroll taxes than they do in income taxes. the challenge is those payroll taxes were earmarked for social security and medicare and they don't generate adequate revenues to be able to live on the promises that have been made under those programs. those programs are geared to provide more benefits for the less well-off than the well-off people. that makes sense. we need to take care of the disabled. in many cases what the government has done is it has overpromised for broad cross-
section of society, going well beyond the poor and well beyond the disabled. it is done that in connection with a number of health care programs, whether it be medicare or the new the affordable care act. ultimately, we will have to go back and rationalize our promises, recognize the difference between universal opportunity and universal subsidy, focus on broadbased societal needs rather than unlimited individual wants, and do it in a way that is pro- growth, does not include the prime rate, and provides a safe, sustainable social security net. host: the move into the office in 1998 and served 10 years. did you see a lot of this coming?
guest: i did, but in 1998 when i came in we had a surplus. been in 2000 we actually had a true surplus, excluding social security. we paid down debt, which is the first time we had done that in many years. then what happened, in 2000/2001 there were projected surpluses as far as the eye could see. i testified many times on capitol hill. khyber asking what are we going to do about the surplus, that maybe we would pay off the national debt. i did not worry about paying off the national debt. first, i said, these are protected and they may not happen. we face large structural deficits due to known demographic trends and rising deficit costs.
i tried to get them to use prudence. starting in 2003, unfortunately, the wheels of the bus came off and things have been out of control ever since. both political parties are responsible. host: you mentioned 10,000 retirees. guest: every day for the next 17 years. what that means is you get a double whammy. what happens is when people retire and they go on social security and medicare, they are generally not working or they are working less. that means the federal income tax revenues will go down. federal income tax revenues will go down prefer the more, payments for social security and medicare will go up. since the government keeps its budget on a cast spacious -- cash basis, you get more spending all at once and
demographics are destiny. host: in terms of what those folks might get compared with now, what should they expect? guest: in the case of social security, we should have it in a way that maintains it, with a supplemental account, particularly. you can gradually increase the retirement age over the years, increasing a hair benefit for people near the poverty level. -- increasing the benefit for people near the poverty level. you can do those kinds of things. the younger you are, the better off you are financially, the more you'll be affected. the older you are, the less you'll be affected. all we need is leadership. host: the next call, north carolina, republican line. caller: good morning. let me get this right. as far as i'm concerned, the people in washington have no idea what is going on. they all have no common sense. they all sit there and try to put stuff into it and it costs us more. everything they do -- they sign something in the office they don't even know about the whole thing. i don't sign a contract or nothing unless i know what is in it. i don't understand how you guys do that. and i don't understand how you take something that you're trying to pass and put 16 other things into it.
it would be so much easier if you would pass one thing at a time, instead of trying to pass 16 things at a time. i did have some other things, but i just cannot go into it right now. host: let's get david walker's response. guest: i am not an elected official. i am not part of the problem. i am trying to be part of the
solution. i agree with the thrust of what you're saying. i believe washington is out of touch and out of control. i believe one of the reasons it is that way is because were dominated by something our nation's founders never intended, called career politicians. a vast majority of the elected officials of the federal level may or may not have had a real job in their life. once they get elected, they don't. they want to keep it for life. the only work three days a week in washington, d.c. they get off seven times more than the typical american. if they got paid for results, they would owe us money. it is time that we the people start putting pressure on elected officials to start working full-time and start generating results. we not only need policy operational reforms, but we need political reforms in order to revitalize our democracy. today we have a republic, in my opinion, that is not representative of or responsible to the public. that needs to change.
host: does that include term limits? guest: it does. we need to think about redistricting reform to maximize the number of competitive districts consist of the voting rights act and set of minimizing -- instead of minimizing. we should get rid of democratic and republican primaries and go to integrated and open primaries. the top two vote getters, including minor parties, would runoff in the general election. we need lobbying reform terribly, campaign finance reform, and we need 12 to 18- year term limits, in my view. host: a tweet asks, by sir, your including the house and leadership, are you? is that the answer, term limits? how to get to a point of leadership as if you want to see to solve the problems as you see them?
guest: leadership involves all branches of government. the united states only has one it chief executive officer. there's only one person who is elected by all the people, and that is the president of the united states. senators are elected by people in their state. members of the house are elected by people from a congressional district. only the president and vice- president, which is on the ticket, are elected by all the people. in the congress, it is a committee. you cannot run a country by a committee. we have to political parties, which are factions. that's a tough enough time controlling their factions. we need extraordinary presidential leadership and when the the leaders of congress to
be able to work with the president on the principle based approach to achieve reasonable compromise for the good of the country. right now the country is very closely divided. the margins were greater in the electoral college than they were in the popular vote. this is a very divided country. it is also a very frustrated country. they wanted stars in progress, not partisanship. host: jonathan, independent caller for david walker. caller: good morning. everybody talks about the fiscal deficit from the federal government, but very few people talk about the trade deficit and the effect that has on the fiscal deficit. our tax code needs to be reformed. we don't tax money going out of the country, and we don't tax it until it comes back in. we need a major reform we can
have capital that comes into the country when we don't tax it, we encourage it. when capital goes out, we discourage it through taxation. and maybe use that money to build up our infrastructure, put people back to work, and make society more productive. when people have a job, they pay taxes. they are not a drain on the system via the i think we need to get smart and quick. that is my comment. guest: i would said the country faces a number of what i call sustainability challenges, meaning our present course is in prudent and unsustainable. fiscal policy, which is taxes and spending, people understand that. our trade policy, we need free
trade but fair trade breve we don't have that now. with regard to fiscal policy, on the corporate side, we need to make it simpler, more competitive. we need -- there are problems with regard to how our current tax system is. we need to address a number of other issues such as our education system, our critical infrastructure, our immigration policy, and many others were where we are now is not where we need to be. we need to recognize that reality and make changes. host: the headline this morning
-- what does this mean to you? guest: what does it mean to america and what does it mean to americans is more important. it means because business is uncertain about the future with regard to tax policy, with regard to regulatory policy and government spending, they're becoming more conservative and cutting back. it creates an additional sense of urgency for congress and the president to work together to address the fiscal cliff and build a bridge for a grand bargain to avoid the fiscal abyss. if this continues, it means slower economic growth, less job opportunities for americans. on the other hand, if we can avoid the fiscal cliff and build a bridge, we can totally reversed this. we can send a very positive signal to business, to the markets that will end up creating additional opportunities, additional growth, and will help our physical condition. that is what we need to do. host: this gets us back to the earlier chat about broader tax reform. explain to our folks in the short time we have, what that means, how long does it take? what is the process?
this is not just something they cannot get before the end of the year, is it? guest: no, it is in. i think we can do it more expeditiously than was the case under the reagan administration, but you need to engage the american people and conduct hearings, put together the necessary legislation. there are things that need to be done as a matter of prudence and due process. i think it is possible to get it done next year as part of a so-called grand bargain, and i think we will have to do a grand bargain. the republicans are not going to allow additional revenues absent tax reforms and absent reforms to social insurance programs. the democrats are not going to allow social insurance reforms
unless they achieve additional revenues. and both are going to have to come to some agreement on defense and other spending reductions that won't compromise national security. it is very possible to do. i just came back from a 34-day national fiscal responsibility bus tour where we got 92% agreement on principles of reform and got a minimum of 77% support for specific reforms across all those areas and others have just mentioned. you say, what is the problem? leadership. host: the next call, virginia, democrat. caller: my first question is also or a comment to c-span. could you do me a favor, every time you have one of these think tank people on, and that includes you, mr. walker, i want to know who is your top individual donors? to me, whether it is heritage or bookings, i think we need to know where you are coming from. host: let me stop you there. fiscalalking about the cliff. guest: i'm a political independent and have been for 15 years.
the comeback initiative is funded through several sources first. we get a grant from the peterson foundation. we have individuals of different groups. i dedicate all of my riding fees to the comeback america initiative. those are the sources of our funding. you can go to our website which is keepingamericagreat.org. we will be filing a tax form that is disclosing. host: does that help you? caller: no, that is a big spin. who is your top donor? guest: i just told you it is a foundation, the peterson foundation. we have other donors as well.
all of my speaking and writing fees, which are several hundred thousand dollars a year, go to the nonprofit. that is the source of our funding. host: tell us to pete peterson is. guest: during the nixon administration, he has a significant experience in the public and private sector and lives in new york city. host: how about a question or comment on the budget talks in the fiscal cliff? caller: i would like to talk about that. >> when you speak we need to broaden the tax base and you want to ask the poor people, because at this country that is in poverty or close to party, and you want them to not only pay a payroll tax and you want that to go away, but you don't want the rich to basically --
you want to keep their tax cuts but you want to add an income tax on top of their payroll tax for the port, how do you justify that? guest: first of all, what i said was a majority of americans pay more in payroll taxes and income taxes. the poverty rate in the united states is 15.9%. 46.4% of americans don't pay income taxes. obviously, if you are near poor, you could argue he should not have to pay income taxes. i don't know what the right amount is, somewhere between 15.9% and 46.4%, but i think it is a lot closer to 15.9%. i believe, and as i said before, that we need to increase the effective tax rate of individuals who are better off financially. but how you increase the effective tax rate matters. one way is to add new tax rates or add on new alternative minimum tax structures.
i don't think that is the right way. i think we need to get rid of a lot of deductions, exemptions, and exclusions. we need to lower the top marginal tax rate. if we can do that, getting down to 25%, 20%, you could eliminate the difference between taxations for or their income and dividends, that is where wealthy people make the money. they do not make it in wages. i think we need to consider a standby progressive tax. wealthy people do not spend just based on the income, but based on their wealth. i am for comprehensive tax reform that will get more people paying something under more progressive tax system, the will increase the effective tax rate, and the percentage that the wealthy pay and will try to minimize the burdens on the middle class, quite frankly, and more disproportionate share
of irresponsible government policy. host: we have about 50 minutes with our guest david walker. this is dick durbin yesterday. [video clip] >> if you talk about revenue and tax reform, they will sit still for that conversation. i was say to my friend the congressman, he said sparing the middle income families will solve the problem. it solves the problem for them in america, but it says when it comes to tax increases, let's go to those who can afford to pay. they should pay a little bit more. they have been blessed and success. paying a little bit more this of this national problem is not unreasonable, but we do have to
cut spending. we have to look at entitlement reform that does not threaten the existence of important programs like medicare and medicaid. host: the wealthy should pay more, dick durbin says. guest: that is right, but we have to use terminology people understand. we need more revenue. one way you get revenue is through additional taxes. but there are different ways to get additional tax revenue. one way is to add on additional tax rates or add on new taxes. another way is through -- get rid of what i call back door spending, deductions, exemptions, special preferences and disproportionately benefiting the wealthy. get rid of a lot of those. streamline the tax code. simplify the tax code and will generate more revenue. republicans believe, and they are right, that if you end of simplifying our tax code, it will get more economic growth. if we make these decisions, this this will end up investing more. that is true, but you cannot solve our problem just with economic growth. both parties have allowed government to grow too big, promised to much, and it is time to restructure. host: another piece speaks of
the limiting deductions, talking about taxpayers in high tax states would be hit harder. there's a little chart here in case you're interested called "getting a break." they listed some of the higher income states. california leads the way. if you go down the charge, the lowest states, indiana the lowest in terms of just what folks are getting in their homes in terms of added as -- itemized deductions. otherhear from the gentleman we heard in that clip. [video clip] >> tax increases to chase after higher spending is a fool's errand. we need to have that balanced approach we have all been talking about, which is increasing revenues through a process of tax reform, then spending reductions.
we've had four straight years of trillion dollars plus deficit. you cannot continue this and have economic vitality, which is what we need. host: anything there you want to respond to? guest: the federal government spends over $1.40 for every dollar it takes in. you cannot continue to do that without having a day of reckoning. we need comprehensive tax reform. we need a comprehensive approach to regaining control of the budget, social insurance reforms, defense and other spending reductions, and tax reform that will generate more revenues. i don't believe the word "balanced" is correct. it generally means 50/50. the general view of the american people based on the 34-
day tour i just took, keeping america great -- you can see the results on keepingamericagreat.org. we need to cut spending at about three times as much as increased revenue. and phase in these things so we do not cause another recession. and people can have time to adjust. host: republican line, for david walker. caller: thank you for taking our call. david, we spoke on several occasions. first of all, i think the goal of some symbols is -- simpson bowles at this time is not achievable. there's talk of a $4 trillion reduction, now we would be lucky to get to $2 trillion cut in spending. i think a representative that just spoke, i just mentioned a combination of both spending cuts and tax increases is the only way forward to avoid the fiscal cliff. although, the only thing we hear right now is tax increases for the wealthy.
people making over $250,000 a year. i agree with you in the sense that, david, $250,000 in income with the cost of living in different from geographic region to geographic region does not necessarily mean a quality. with these issues upon as, it seems almost apparent there getting to a kick the can down the block again. what impact has kicked the can have on sequestration? and what impact does it have on addressing these fundamental basic issues this country faces both short-term and long-term debt? guest: first, we have to recognize reality. we have to decide what is going to happen on the so-called fiscal cliff. you're not going to get a grand bargain during a lame-duck session. there are things they could do and that they will build a
bridge -- you may call it kicking a can -- by building a bridge to try to do a much bigger deal in 2013. i don't think is realistic to do a big deal until 2013 because, quite frankly, they have not engaged the american people enough and they have not done the work to the committees here in washington. one of the things that i think needs to happen is there needs to be an official type of government education engagement effort by clinton did in 1998. an expanded version of what we did in the comeback america initiative in september and october. it prepares the people for these tough choices and solicits their input. if you get the sequestration, there are several hundred billion dollars of spending reductions that will take place. if we go over the fiscal cliff, there are several hundred billions of dollars in tax increases that will take place for this next year alone, and much more over time. i believe we can avoid the cliff. i think it is about -- important to avoid the cliff.
it is equally important, if not more so, we achieve some type of grand bargain in 2013 because the structural deficits represent the disease. the fiscal cliff represents the symptom. host: new york city, independent color. caller: thank you for taking my call. mr. walker, i recently heard in the news the congressional research service, a branch of the cbo, released a report entitled "taxes of the economy." to the top economic rates since 1945. in the beginning of the report, at one. essentially it talks about the taxes from the mid 1940's going from 90% in the top marginal rates down to what it is today. it says the analysis of the data suggests reduction in the top tax rates have had little association with savings, investment, or productivity and growth. this just came out in september. its author was a specialist in public finance.
i know mitch mcconnell has tried to bury this report because it came out before the election. i wonder if you have any comment on it? this seems to be a kind of white elephants the republicans have been throwing out for some time that lower taxes and we're going to have more revenue. guest: first, the congressional research service is a division of the library of congress and separate and distinct from the congressional budget office. secondly, all of the reports are not automatically made available to the public. the member of the senate or house that requests for report has to allow it to be released to the public. i'm not sure what the circumstance is here, if it is available to the public. i have not read it. i don't know it is available to
the public. frankly, we need reforms on this. there needs to be much more transparency with regards to the reports. what ends up happening, the members of congress, if they get a result they like, they will release it. if they get a result they don't like, they will bury it. we're paying for all of these reports, not just some of them. congress works for them, and -- congress works for us, not themselves. i've said over again, not all tax cuts are equal. not all stimulate the economy. very, very few tax cuts pay for themselves. i mentioned earlier that we need to increase the effective tax rate as well as the share the "wealthy" pay. you have to keep the mind there's a simple principle of math. you can confiscate the entire net worth of the entire 1% in this country and we would not come close to solving our fiscal problems. it is that serious. yes, we need to generate more
revenue and the wealthy ought to pay more, and yes very effective tax rate should go up, but how you do it matters. comparing back to the 1950's is, frankly, ridiculous. the world is a totally different place today than it was in the 1950's. after world war ii, we were over 50% of global gdp. the dollar was as good as gold. demographics were working in our favor. frankly, we did not have that much competition. we are in a very different situation than the 1950's. host: on twitter, what happened to actual spending and income to be balanced? guest: things spun out of control starting in 2003 when the statutory budget controls that are supported by president bush 41 and bill clinton expire. that meant the so-called payroll rules that you could not end up doing that finance it cuts, could not expand new government programs of the should pay for it. they expired.
washington spun out of control. three things happen in 2003. the second round of tax cuts, we could not afford them. we invaded a sovereign nation without declaring war, without paying for it -- iraq. we expanded medicare to add prescription drugs, added $8 trillion to medicare was already underfunded about $20 trillion. irresponsible. things have frankly gotten worse since. host: mike, centerville, massachusetts. a democrat. caller: hi. i am wondering why since our healthcare system is one of the biggest drivers on our national
debt what we never hear cbo numbers comparing single payer to the private situation have in place now. guest: mike, cbo is generally requested to do work. frankly, they have a huge supply and demand imbalance. they're getting a lot more requests than resources -- then they have resources to deal with. you have to ask cbo why they have not done that. let's understand this about health care. we spend twice as much per person as every other major industrialized country. we get below average results. it is estimated the affordable care act will cost $12 trillion more than the politicians claim.
based upon reasonable, sustainable assumptions, medicare is underfunded $37 trillion and growing a couple trillion a year by doing nothing. we have promised to much in healthcare. we need a universal health care system in this country that focuses on broadbased needs, not unlimited individual ones. preventative, catastrophic with options to get more. we need a single financing mechanism. we always tend to do more for the poor, disabled, and veterans. but for the vast majority of the population, the government has promised wait too much. we need a budget like every other major country for financed health care, based on evidence rather than outcomes. we need malpractice reform. check out our website for a lot of great ideas including with the american people said about a number of these reforms were there was significant majority report -- support. host: one last call, louisiana, independent. caller: good morning. i have two questions for the first of all, if he could
quickly answer this one, it is a comeback for my next question as the comptroller, what exactly were you in charge of? caller: as the comptroller, what exactly were you in charge of? who is in charge of overseeing social security? guest: first, i was comptroller general of the united states which is the chief executive officer of the government accountability office. which does audits and investigations and policy analysis. it is in the legislative branch. it works with congress and the american people. we do work across the spectrum including with regard to social security.
i was a trustee of social security from 1990-1995. host: and your question about the fiscal cliffs? caller: this is the thing that --s mid rig there are plenty me there are plenty of trustees who are not living up to their fiduciary responsibilities. everybody wants to call this an entitlement. this is our money that was entrusted to your care to make sure it was there for when we retired. this has been around since 1936? guest: effective around 1940. caller: with all the projections and knowing what is going on, the most intelligent of the intelligent people in the world and nobody can get this right? quit borrowing from it, pay it back to fund world war 2 and
give it back to us. guest: when i was a trustee along trusteestan ross, we blew the whistle that washington was out of control. that social security and medicare were unsustainable. the truth is that the reason that the government has been handling the finances of social security the way that is because that is what the law calls for. the law calls for any surpluses, excess of revenues to be invested either in u.s. government securities or securities that are backed by the full faith and credit of united states government. one of the frustrations that i have is that government uses certain words that don't mean the same thing. trust funds, i have been a fiduciary and the private sector. those are separate and distinct
legal entities. if you do some of the things in the private sector trust fund that the government does, you would go to jail. host: our guest has been david walker, the former comptroller general of the united states. he is currently with the comeback america initiative. thanks as always for your time than a good to be with you. >> live from the brookings institution where the ceo of the nasdaq stock exchange is just about to deliver remarks on what is called the fiscal cliff. and its impact on capital markets. according to the cbo, this could put the country back into recession if congress does not act. our guest this afternoon will be robert greifeld and he is joining a number of other business leaders who voiced their opinion on the issue. introductions are being made and live coverage from brookings here on cspan. >> we have lost track during the
debate a brown sarbanes oxley and the debate about dodd-frank that our capital markets are the envy of the world. our equity markets are something that are unique to america. they are deep and strong and one of the key ways in which we keep growing an economy which is competitive in the world. that is why we have as to bob to come here. people in washington want to know what market participants think about this or that. today we have the market personified by bob greifeld, the ceo of the nasdaq. it is my great pleasure to welcome him to brookings. [applause] >> thank you for that kind introduction. i have to start by saying i first met glen be seven or eight years ago and at that time, i
was a capable and focused business execs but did not have a lot of time to spend on views of the wider world. under his tutelage, that has changed and we have had a number of interesting discussions. as i stand here today and talk about certain policies, recognize if you happen to disagree with me, blam eglen what he has taught me. it is my great pleasure to be here at brookings. i appreciate the opportunity to speak today. i would like to especially thank martin. we all need to take a very hard look at the significance of the fiscal cliff that is facing the united states of america. what is the consequence of our failure to act is a question we would like to answer today and what is the political mobilization necessary to prevent a further damage to our economy? we all here today have an
important role to play in solving the fiscal challenges facing the u.s. i look forward to discussing that with martin. i am the president and ceo of the nasdaq group. we operate the nasdaq group here in the united states and 22 markets around the planet and we are proud of what we bring to the table. when you think about me standing here today, it is kind of interesting for the stockmarkets to be talking about a debt crisis. when we talk about debt, it is not equity. we americans don't traded and don't listed and don't regulated so why am i here talking about that today? i want to talk about the federal debt today and the deficit because, in many ways, it is, in fact, a spreading cancer. i called that because like a patient with a well-diagnosed cancer, we know is there and we
know it will spread and we know what it can do. we are now not operating as a person patient. to many americans are choosing to ignore it. we are in some form a state of denial. because it is not yet causing a crisis, too many americans have a false sense of security that everything is okay. there is no decisive action required today. we feel we can deal with it tomorrow. of course, neither of these two beliefs are true. what is certainly true is the federal government seems quite able to add $1 trillion each year to the national debt. many people believe we can do this in definitely. too many people actually believe this can go on for decades and decades. they think so because one of the fact is, as a country, we can currently bar money -- borrow
money at 1.7%. last week it went down under 1.6%. that is a happy state of affairs. we do not deserve to be able to borrow that money so cheaply because, as a country, we have not yet demonstrated the vision or the courage in how we will pay it back. we must decide. we must decide because the process of delaying the day of reckoning with our $16 trillion debt is hurting our economy today. we don't see it but it is hurting our economy, our businesses, and is hurting the market. the fiscal cliff scenario with a mandate for higher taxes and reduced federal spending is now just two months away. unless congress and the white house intervened, this will happen as "the wall street
journal"reported a fried egg, no doubt, most companies would suffer if the u.s. goes over this cliff and economists say this will slow economic growth and will drive us into recession. my good friend terry duffy at the cme said we have seen corporations poured cash, individual doing the same. -- ohorading cash and individuals doing the same. this is not the average business and people need to realize that. those of us outside of government must continue to make it clear to intend that compromise can no longer be considered a four-letter word. in discussions and debates that prevented the decisions from happening last year, we must move past that. it has certainly been a plus to
hear the president and house speaker say repeatedly over the last two weeks that compromise is now with both parties want. words are a start but words are easy and we must have a result for action. -- a resolve action. i don't expect to have a grand bargain achieve by the end of the year. the extension of the bush tax cuts and a deal not to enforce across the board federal spending cuts on january 1 could be the most we could reasonably hope for. that will leave the markets in some degree of uncertainty. the uncertainty relates to whether or not the grand bargain will be released in the first half of next year. that uncertainty really is a cause for concern for all us in the business community. when we think about our u.s. indebtedness and the ratio of
increase in the federal debt, is important to recognize that our ratio of gross debt to gdp is now more than 100%. among the g-20 economies, we now rank third of indebtedness behind japan and italy. five years ago, we were at 62% and ranked ninth. at the current rate of u.s. federal debt rising by $1 trillion per year, the ratio of debt to gdp will be 114% by the next presidential election in 2016. as many scholars have noted, increasingly of late, the downfall of great nations across the centuries always began with their inability to respond when the foundations of their financial houses cracked. the truth is, debt is not an alternative means of funding. debt, in our context, has become
a convenient narcotics, as easy and addictive as any drug lulling us into complacency by postponing the hard choices, raising revenues or reducing spending. increasing levels of debt also increases the amount of interest to be paid, further increasing the amount of resources that ultimately we need to be devoted to repaying the debt. i run a company at the center of global markets that interacts with 3200 listed companies around the world and many market participants. i speak every day to chief executives who run these companies. we all agree that a government that incurs substantial recurring bar wing as a means of funding eventually will act like a company short on cash flow. by this we mean a company to short on cash flow will always postpone investments. they will cut maintenance, r &d,
pensions, and benefits and otherwise short change its future. all the while, it will scramble in turn -- for new sources of revenue and new opportunities outside its operation. when the government behaves this way, it not only shortchanges the future, it profoundly impacts the entire economy and all its citizens. the longer we go for a better balance between federal expenditures, the more we will postpone and the night expenditures necessary to support the future. we are creating a terrible burden on our children and grandchildren tomorrow an exasperated -- and exacerbating the paralysis of the markets today. the historical evidence suggests long run implications for our economy could be severe if our $1 trillion per year continues.
highly indebted countries dedicating 90% of gdp on average experience a reduction in gdp growth of one percentage point per year relative to less indebted countries. at the individual level, a slower pace of gdp growth means the per capita gdp could be reduced by as much as 30% by 2013. this trend pleasant to $18,000 less per year for every man, woman, and child in the u.s. than we would have otherwise earned. that prospect is now less than 20 years away. the major financial crisis brought on by high levels of debt could have a negative impact on the economy than these numbers indicate. in the short term, the primary impact of the debt trajectory viewed as unsustainable is more uncertainty. we live with that today.
there is more uncertainty about future taxation and spending policy. there is more uncertainty about government's ability to prepare for future needs by reloading the fiscal canna necessary to deal with the geopolitical or economic issues. there is more uncertainty about central bank intervention in the credit markets and when it will end and the subsequent course of interest rates. increasing. there's more uncertainty about who will hold the debt, who will get caught holding the bag when the low interest rate party ends? at nasdaq, are listed companies cannot innovate or concentrate on investing in new capital, hiring new workers, grow their businesses when they have to worry about the safety of their cash. they hesitate due to uncertainty about future growth. in the case of the sequestered, they even need a plan for layoffs. there are enough challenges and
headwinds for managing business operations day to day. chief executives understand that when they surveyed the destructive market consequences created by the federal debt. they shake their heads and think," these are self-inflicted head wounds. why is this still happening?" a survey conducted in september by the senate for quality said that 35% of investors say continuing budget deficits and federal bar wing have more influence on their confidence than any other issue or event. that was in september. i would venture to say it is higher today. when are listed companies do not grow, investors do not buy stocks an entrepreneur cannot raise capital. when these things do not happen, the u.s. economy does not grow and the american people suffer and so does the dynamic nature of our markets. people might ask," what does
that mean with respect to the market? why does that matter?" the stock market is the most transparent price discovery mechanism for capital. it sets the price of equity risk and return and they are exchanged between investors. i for partners and investors also used stock market prices to make their own decisions about raising capital and investing in new companies. the stock market does not set the risk and return in isolation. it does so in the context of the broader economy or stocks must compete with other assets for investor capital. the government inaction and the central bank intervention in credit markets to keep interest rates low and finance the deficit is creating distortions
in the competition for other assets. we all realize at some point that this distortion will end. it is the same kind of deleveraging we have felt for the financial crisis of 2008 but this could be a much grander scale. many types of assets will be re-priced. bond yields will rise and bond prices will fall and the cost of financing current deficits will increase. there won't be much cash available to move into government investments for the future. new bridges, research and the basic sciences, public schools, better equipped for the 21st century, and so on. it will mean less spending on a rigid on technology and less capital available to existing companies and less capital for entrepreneurs looking to go public on our market. a decline in american ingenuity but would be a consequence in overtime, there would certainly be decline of our position in the world. as all prices adjust to market
forces could reach a point where investors refuse to buy u.s. treasury bonds. we see investors' reaction -- reacting to the potential of these realizations now through an aversion to risk. since 2007, over $1 trillion has flowed into bonds and even a greater amount has flowed out of equities. in addition to a lack of clarity about huge tax policy, -- about future tax policy, this act as a deterrent for investments. $1 trillion is moving into fixed income where it is basically paying zero. that shows a fundamental aversion to risk. for companies able to access the credit market, times have been pretty good. investor appetite for this debt translates into cheap money for many companies. many start up companies do not
have access to debt financing. the companies that create jobs in this country rely on equity financing. the debt markets have never been available to them and are not available to them today. the vicious cycle we're in today is the startup companies have limited access to capital and capital is not there because they are growing an aversion to risk and that was triggered by massive uncertainty by what we are about and what our plans are for addressing -- addressing the fiscal deficits. 1.7% is certainly attractive to many companies who have been able to access debts but the question is -- do we deserve that rate and why is that right here?
a debt is cost based on the ability to repay. if our ability as a nation to repay was based solely on our ability to print money, debt would cost more than 1.7%. that is because inflation would be created as a result of the printing of money on the other hand, our ability today to repay should be based on our ability to increase revenue or decrease spending. with political dysfunction, we're not sure we have that. we appear unwilling or unable to use that tangible ability. we have to recall' in washington last year around the the debt ceiling debate, the reaction to simpson-bowles and the performance of the super committee. the reality is our ability to pay is based primarily on the belief that we will find a buyer
for our future debt and we will in turn use those buyers funds to repay our current debt. and bankers terms, we think we can keep rolling it over. others have said that we risk losing the u.s. role as the world's reserve currency if we do not be a responsible way. that is not a current rest but it is a risk within the decade when you look at the pure math. that ignores the emotional aspect of the financial markets. our ability to find a buyer is based on the credit market assessment of future actions of the fed and the dollar's role as a world currency. to the extent that changes, we will be dealing with a new world. when rates eventually go higher either due to the fed finally tightening credit or the erosion of the dollar, then credit will no longer the cheap.
at 1.7%, that will be a dim memory. if this occurs at a time dictated by the markets rather than by washington and's own choosing, there will be a number of a very significant consequences. investors will begin to refuse to buy current government debt and as possible you could see a threatening crisis in the years to come. the federal government would be hard pressed to reload the fiscal cannon. the cost of the debt service in that environment will be enormous. investors and retirees with social security and state debt will see their portfolios lose value. home buyers will see the cost of mortgages to rise and home owners will likely see the price of their homes fall. as few buyers qualify for these mortgages. the government could have its
back to the wall at that point and we would be forced to embrace more drastic steps to ensure fiscal balance of the government does not take action now. why hasn't the government taken action? let's be candid -- putting aside the rhetoric -- rhetoric and the possible last two weeks, the behavior in washington in recent years confirms we have lost the ability to compromise. politicians who attempt to move to the center are set upon by their own side. one size faces continuing pressures never allowing a cent of spending cuts and there's a call countervailing opinion from the others as a reserve -- the other side that does not want a tax increase. each side of states the other side cannot win no matter what the consequences. the vast majority of americans consider this irresponsible and want solutions, policies that seriously confront the national debt we are facing. as i think about this, the
situation within the beltway is a variation on the classic prisoner's dilemma game. in that game, each player's optimal action lease to an outcome that is damaging for both. in the case that federal got -- debt and the government, what each party perceives as its optimal action is essentially neutral for them but extremely horrible for the economy and the rest of us. i am one of more than a corporate ceo's who will sign doubt for the campaign to fix the debts. some of you might have seen the news about our goals and our agenda. we think there is a lot to like in the simpson-bowles recommendation. we all recognize a common thread that -- the inability to be sustainable in the federal budget, the inability to have a sustainable federal budget is hurting our business in a
fundamental way. we all agree there must be shared sacrifice. these federal budget must be put on a path to sustain the ability that can clearly withstand any changes and the political winds that might occur. this means additional revenues will need to be raised including from businesses by broadening the tax base while reducing the tax rate. tom quinlan supports the reduction of the elimination or reduction of certain tax deductions in exchange for a lower corporate tax rate and the repatriation of cash held up by the u.s.. the uncertainty caused by not addressing the fiscal cliff will continue to hurt business. tell us the rules and we can
play the game. if the rules are not certain, we cannot start to play the game. with dollars that federal spending will need to be curtailed. i want to be clear -- i am an optimist. i leave the gloom and doom most on to my lawyers and accountants. it has been hard to be completely optimistic about our economic future if the budget problem is not addressed. globally, we are seeing recession in much of europe. chinese growth is slowing as is grow the other emerging markets. out better to act on the u.s. budget is aggravating existing weakness in the global economy. this is clear, it is time for real leadership in washington, for elected officials to have the courage and vision to do
something right for our country. it happened under president reagan and president clinton when major compromises were achieved on debt and deficits. it can and should happen again. if not, our country's economy will grow slowly -- more slowly than it otherwise would have. at nasdaq, i suspect we will continue to face headwinds in our core business. this has negative implications for our trading and listings business. we may do better than our competition but not as well as we should be doing and not as well as our economy should be doing. the confidence of executives who invest, grow their businesses as well as investors in our markets and that is directly related to the problem of the federal debt and deficits. we also recognize the fiscal
cliff and the sequester are not a compromise or even a path to sustainable growth. these policies were created to prompt the government to act in the future. now is the future and we are waiting to see which side will blink and who will win. this could assure are mutually decided destruction. my our elected officials must recognize the principle governing responsibility is paramount to their legitimacy. governing to win does not, in fact, provide legitimacy. before we begin the q &a, i want to simply state that after this year's long and bitter political season, it is time for air nation to come together. time is running short to decide how we will address our national
debt problem before it becomes a crisis. i certainly want to urge all of you to join in. everyone can pitch in now in their own way. we created a website for employees in the u.s. to fix the debt and communicated to their representatives in congress about the urgent need for action. business leaders, employees, investors, retirees, we all share a huge stake in this economy. i invite chief executives of other countries who have not committed to fix the dead to join me and the attic -- and the 80 other ceo's ready to be involved to drive this movement which was organized one year ago. as we continue to build rapidly strong national voice demanding
compromise, that will make it more appealing and politically possible for our representatives to take the necessary action so thank you. [applause] 3 >> thank you, i am marchant bailey and i will start of the questioning and then we will throw it open to the audience. i want to congratulate you for this effort to fix the dead. the debt. many of us felt the pressure from the business community was important to get this done so i
think it is terrific. you mentioned some of the consequence is likely to happen as a result of continually increasing the amount of debt. equity markets may suffer and eventually is and as rates will rise. -- interest rates will rise. we have been hearing that for a while. equimark it's an interest rates have stayed low. can you give us a sense of why that is or what is the time horizon where we might see some of these impacts? that would put pressure on congress to do something. >> i think we have seen that pressure. when you speak to the fact that $1 trillion has moved into the fixed income market, that shows investors are saying they have real aversion to risk. the demand and the debt market has helped with central bank action to contribute to low rates but that does not speak to
our unemployment issue. when you look at what drives the job growth in this country, it is small businesses, they are growing. those small businesses are growing but right now they are not part of the debt market but they are exported from the market because you don't have a supply into that world. one of the few bipartisan effort to we saw last year was the jobs act. that was in recognition that because of the state of affairs, we were choking the life of the small business growth. that was meant to help it. we are definitely seeing a clear impact today. >> there is a lot of merit to simpson-bowles.
there is also the rivlin- domenici plan. many people including myself consider business taxes that the rate is high and may be discouraging people from investing in the u.s.. on the other hand, we need more revenue and need to raise taxes. how do we square that full set? >> when you look of the business tax rate, i think we are second of the developed countries with respect to what we charge corporations. sweden is a country we run and they believe in government and they are taking their corporate tax rate down from 26% down to 22%.
with our non-competitive from that point of view. the extent that we addressed the cash rate of the corporate world, we will certainly see a renewed effort to invest in the u.s.. we obviously have a gross tax rate of that affects the tax rate. the other topics related to that is the repatriation of a fobbs. the stockholm stock exchange will settle -- celebrate its 150 year anniversary next year. we make a dollar in stockholm. for us to bring the money home it would be taxed again. we're not going to do that.
we want to make sure we take that money and invest somewhere outside and it is not a coincidence that the three -- last three acquisitions will done are from companies outside the u.s. who can use will recall our arap cash. you need to have sensible adjustment to that policy. >> there was an event in new york last week, a clearing house event, and there was a lot of wringing of hands of the reputation around wall street. a lot of banks and other people on wall street feel they have taken a big hit t. is this something that should just happen with the passage of time? are those things that you and other leaders can do to try to get people to understand the role of financial markets?
>> you will need the passage of time. 2008 happened and the economy is still recovering. the financial industry has to do a better job not talking so much about financial innovations of the products they been -- they bring to individuals and corporate america. yes, we have to do a good job but it will take time and it is now likely to happen soon. t >> why can't i always encounter is that we never had these things 50 years ago. my thought is that it is a different economy. >> the general heading of risk management products and that the financial center has the ball but of the last 10 years or so have been a great boon for the
country. in terms of the less than wall street, we have to go to the national uses of those products like the farmer or the power plant or regional water if you have your own plumbing. as an investor, you like to invest in the core business. the harder message for the journal is for any financial market, the natural are seen as a good actor in the place. it to natural buyer or seller of interest.
the intermediaries in the bill times are subject to vilification the definition and the role of intermediaries and the marketplace is not well understood. it is also a hard message to deliver. >> let me throw it open. i have more questions but let's go to the audience. >> you mentioned simpson-bowles and the need for revenue and one of the ways simpson-bowles proposes revenue is increasing on taxes on capital gains and dividends. is that something you and other co's can retaliate. >> it has to be shared paying. -- pain. it is going to be difficult any way you slice it. some of the revenue increases have to be painful.
c.l.'s are smart not to realize that the extent that they individually are paying more in taxes, does that bring stability to this system. the bar owners of vassal so ago we a second try. i believe people think that when you have revenue increases it can be a rising tide. >> question from the audience? yup. >> i am from the australian financial review. in the 44.6% of rates for next year if there is no general
>> you're ok now. >> did not catch the last part but i know where you are going. >> what you are speaking to is a symptom of the sequestered. to the extend intelligence is not brought to the debate, then you will have certain actions which don't make a lot of sense. the sequester was never meant to be implemented. it was meant to be so onerous that cooler heads would prevail and compromise would be the rule of the day. if the question was do i think going to a different rate on dividends, i think is bad.
we need to call our policy beggars to test to come up with a logical plan the has the proper balance. >> one of the intents of dodd- frank was that moved derivatives on two exchanges. we had exchange desk based - exchnage-based . guest: >> this was really to move derivatives to clearing houses and not so much exchanges. they certainly are trying to promulgate more transparent trading but the clearing house part of it was mandated. it brings to light the credit dimension of transactional activity. in the equity world cover credit quality is somewhat assumed that
you have a short settlement cycle and you also have deep and liquid markets. as you get into derivatives contracts and some of them being laundered, the credit aspect becomes real. and more onerous. all thesing removing credit from two parties into a clearing house environment, the credit really dominates the conversation. i think it is a good thing for us to be facing a lanai in a car if crisis head-on. how do you stress credits and areas in tough times? we are mucking through a but is better to be doing in now than light we did two dozen 8.
>> i want to thank you for being part of the group that is speaking out. my own question over the last few months as i have been reading more about what the situation looks like, it does not look particularly optimistic. i am wondering that if you had to make recommendations to somebody in your family or a close friend, would you be asking them to make a change in the way they go about things in the future? [laughter]
>> that's a great question. i am fundamentally an optimist. i do believe that cooler heads will prevail. and that we will have not so much in the lame-duck session but sometime in the first half of next year. an agreement, a compromise, which will put us on a path to stability. i know it was the treasurer of australia who said he thought america was one fiscal agreement away from returning to some level of preeminence in the economic affairs. i almost agree with that statement. to the extent to come to an agreement in the first half of
next year and that we do something credible in the lame duck session will calm this down a bit but it has to be something substantial that shows congress on the white house can come to a deal. it cannot deal negligible. if a substantial enough, with a good down payment, go to a fiscal cliff agreement at the beginning of the year, i believe the underlying spirit of the american innovation is still there. i have had a greater perdue -- greater opportunity to spend time in these areas. i would be long-term bullish. >> yes.
>> based in your experience, could you raid on a scale of 1- 10 how much more you believe you need to do to educate new reporters and organizations and political interests that want to use the economy and stock market as one and the same thing. how much more do you feel now as they need to do more to educate people new and old. reality that the economy is not the stock market and they are not interchangeable. there is a difference between political reporting and financial reporting. >> you can start nasdaq u.
>> we can kind of do that. we have our educational foundation with institutions of secondary and higher education in terms of educating about the market. i would go back to one of your premises -- the stock market is definitely some derivative or indicator of the economy. it certainly is not bad in the short term. it is certainly that over the medium term. you have a situation where the debt markets have clearly been super-charged. we know some of the reasons for it and did it dealt it talks back to -- we know some of the reasons for it and it talked to
some of these issues. i think the two of them are joined together. , the medium and long term. our education effort is understanding what investing is and there is a fundamental difference between investing and trading. it is a long-term effort and we hope the bears offered overtime. we spend more time in the world markets today than we did 20 years ago. >> let me ask about the optimism u.s. expressed. if we can get growth going, that will make a huge difference. there are some people like an mit economist who was the co- author of a book saying that a
lot of innovation is taking place but is not a job-creating innovation. they have 700 million users on facebook but it is only creating a few jobs. do you see the kind of innovation -- innovation that is a job created? >> that is working hard to get good news and bad news. >> he struck a bit of a court and got some reviews of. >> when you go out to san jose today and it has been this way all through the credit crisis, there is more jobs -- than people. the last i was there every time i go there, i checked. in the city of san jose, you had 14 jobs that had been unfilled.
that will speak to other issues we have with respect to immigration policy. obviously, the ripple effect through the economy from these high tech jobs is quite strong and could be a second order impact. if he is recommending that we don't want these companies to grow -- >> no, no. >> the question is what else do we have to do besides dominate high-technology. i can see that as a valid question. >> yes, over there. >> thanks very much. i would be interested to know, back to the group of chief
executive officers, who are of one mind about needing to reduce the deficit and get the best down so that the capital markets perform the way they should. to what extent can you tell us beyond the overarching goal of getting the deficit and the debt down, to what extent with this group of 350 people are so agree on the steps by which they would prefer this to be accomplished. i am interested in -- one could say of the congress, many things, but one could say that the congress is of a mind that we need to get the deficit down and reduce our debt and fixed
ratios. it is when you get down to the details of whether you do it through revenues and expenditure cuts, you can see where the impasse comes. drill downeo's through this enough? >> let me start at the macro part of that question. are pragmatic people. when you hear political debate which is basically by neri, we don't relate to that. you always have to go to middle ground.
those of us in business, you never get entirely what you want in any negotiation as though it was middle ground. clearly, in this debate, middle ground has to be some balance between spending cuts and revenue increases. for those on the right to what one way on those left the other, what that ratio is, i don't think the co's par of one mind on that. it could be 1:1 but there has to be some ratio. the statement of the co's saying there needs to be revenues separates them from some of the hard-line positions taken by others. the willingness of the c.l.'s to say yes, to have an increase in
our individual tax rate is acceptable in the context of an overall deal. that is something i think as uniform agreement. beyond that, within particular policy deliberations, you probably will get more fragmentation in terms of viewpoints. the goal of the tour for a rigid corporate tax code is to keep it revenue neutral and broaden the base. i think that has wide support but not unanimous. i think it is wide support there. that is wise to go to a territorial tax system and i get excited about that because it makes common sense and it pains me to have that money the offshore knowing you will never come back. the deeper down you go, the more
fragmented you get. the unanimous aspect of it at the macro level is quite substantial. message we can deliver. >> question? >> hello, i am wondering how you would compare the debt situation, the fiscal situation of the u.s. to that of the bureau's own. -- the eurozone. >> most of our operations in europe with the exception of finland are outside the eurozone/ we're probably not on happy. of our positioning their. finland and several baltic
countries are adopting the euro. a little late in the game. this country has so much more fundamental strength in what you see them in europe. our trend of destruction would be slow motion. with respect to our fiscal capability, we are probably 10- 15 years out from running into the problem you saw in europe. from a mathematical point of view, understand that as to london to as an aide, emotions can make things happen quicker. we're and a fundamentally different place let's not kid ourselves that europe as a road map for where we are.
we are here, we are knowledgeable, we are forewarned, let's get the political will to do something. >> is the fact that europe is a debt crisis, does that make their situation more dangerous? -- does that make our situation more dangerous? >> if you look at what you expect for gdp growth next year, we know we are in an interconnected global world. to the extent you have a recession in europe and a slowdown in china, that puts more pressure on our economy and will put more pressure on gdp growth. our concern is that we are lulled to sleep by fantastically low interest rates. it is a wonderful thing if you are refinancing your mortgage. it is masking the pain in some fundamental way. >> it is not my line but we are
sort of the favorite horse in the glue factory. >> we are a great company so we go in front of the s&p and moody's to get a if the u.s. government had the same process to go through in regard to this credit rating, it would not have a rating that would give it an interest rate of 1.6% on the 10-year. it is disconnected from reality. >> i think that was a question there and that will probably be the last. >> hello. my name is melissa kirby. i was wondering your thoughts on the fact of necessary bailout of the national debt, specifically in regard to insurance companies not being able to make their payments hot on environmental
disasters or otherwise. >> security companies are not able to meet the cost of sandy? >> or in the future with regard to others. specifically more on bailout and the effect of national debt. >> it is hard to see that we do not need national regulation in the insurance industry. we certainly have it for the future. it does have advantages. we still have state security regulators. we have an oversight by there. this ties back to the financial industry. you have to have proper
reserves in the insurance industry. i would say with respect to bailout, they are creating an environment where they do not have to do bailouts. it means there are so many safeguards along the way that were not there. do you separate the investment bank today? you have the vicar's reports in the u.k. which thrilldeals direo its. you have systemically important organizations. clearly what happened in 2008 is a wake-up call for policy makers to make sure that whatever businesses present a risk, some sort of systemic
risk to the economy than that this the fundamental proper role of regulation to make sure that it is in some way firewall so it doesn't have cost contagion. >> thank you so much for coming and talking to us. we appreciate it. [applause] thank you for being such a good teacher. thank you all for coming. [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012]
>> ted talks about the future of network news. the communicators takes a look at the 30 years since the breakup of at&t. c-span 3 has a discussion on global pandemic. >> how does one this is a the feeling about a special friend? it is also a world icon. , in national hero of unimaginable proportions and a
legend whose name will live in history -- after here today. they have been forgotten. fate looked down kindly on us when she chose nailed to be the first and venture to another world and have the opportunity to look back from space at the beauty of our own. it could have been another. it was not. it was not for a reason. no one could have accepted the responsibility of his remarkable accomplishment with more dignity and more gray. he embodies all that is good and all that is great about america?
just before 1130, a behind-the- scenes look at life as a teenager in the white house. they're using gaming theories to solve world problems. >> the former cochairs of the deficit reduction panel spoke about the fiscal cliff, a combination of tax increases starting in january. they are expanding their report that was sent to the president and congress in 2010. this is just over 20 minutes. >> how many of you know how much they have put into this effort.
you are heroes and patriots. there is no way we can thank you enough. [applause] >> all of us involved in this effort, all we stand on the shoulders of pete peterson. >> i started with this marvelous man over 30 years ago when he said the have to do something about the solvency of social security. then we did that danfort thing. he wrote a beautiful book. persistence, loyalty, patriotism. he takes a lot of flak but he is a prince. >> i have chatted with the two of you several times when the commission first started. i could easily sit here and listen to you talk about these issues. but i wanted to get your sense of where we are now.
as we speak, the president is meeting with john boehner, the first face-to-face talk. in december 2010, you called your plan the moment of truth. almost two years later, but moment are we at now? >> i think this is the magic moment. a moment when our generation has the chance to really do something about this problem that we created. it is our generation that got us into this mess. i think we have a good chance. yet a second term democrats president who has come out and said he is willing to put
entitlements on the table. big deal. you have a speaker, a republican speaker who really gets it. he understands the deaths of the problems they face. he has said the are going to put revenues on the table. big move. we got half the members of the senate already saying they will support a balanced plan. which makes a lot of sense. we have the business community lined up firmly for doing something. most importantly, we have the fiscal cliff. where if we go over it, we are going to face the most predictable economic crisis in history. for all of us in here, it is also the most avoidable. i think this is the magic moment
to get something done. >> senator simpson, we never talk of compromise. there is still division here. >> it seems to me to have taken the word "compromise" up a step. three years ago the word was we do not know the word "compromise." if you cannot learn to compromise an issue without compromising yourself, you should never be in any legislature and you should never marry. [laughter] the only troubling thing i see here really troubling is you have democrat leaders -- and do
not forget the leaders have not helped us at all in any effective way. they listen to us and they tell their position, but they have not been out there. what is disturbing to me is the word maybe the democrats could gain if we do get off the cliff. that is out there, and then the republicans say maybe we can gain if we go over the cliff. i think that is disastrous to even think in those terms. erskine says that is like betting your country. i am not quite as warmed by it all, and a couple of years ago you were the guy who said we were going over the cliff, and i said, no. >> i think we cannot be stupid enough to do it. we can resolve this problem now by making some very tough, but doable, compromises. if we go over this cliff and we do not reach a deal immediately thereafter, here is what will happen, and that is about a 1/3 probability that we will go over the cliff and nothing will happen. what will happen is you will
see moody's and fitch downgrade our credit. you will see a stock market that will say we never thought these guys would be stupid enough to do this. you will see a stock market that will really crash, and you will see businesses really slow back on hiring, they will flow back on their capital expenditures, investments. you will see consumer confidence go down, and we will be facing a mess, because what happens, the economic effects of going over this cliff, are enough to slow economic growth by about 3%. we are only growing at 1.5% today, so that is enough to put us back in recession. about 2 million people will lose their jobs and unemployment will go back to 9%. why would we do that when there are good alternatives that we can do compromises now during the lame-duck session? >> a compromise is out there on the table. have things changed in the time that even simpson-bowles is not the right answer now? >> there are certain things that have to be adapted, but what i get a kick out of is there was chuckling.
dick durbin and tom coburn have been tremendously an integral part of this. they really are superb men, and bright and patriotic, and of course the stereotyping is out there, and that hurts everything. they say is durbin part of your plan? oh, god, not him. coburn is part of your plan? not him. they are not laughing now. this is like a stink bomb in a garden party. they do not like it. it is a curse, and the real estate guys and everybody on that list of people that gain tremendously from tax expenditures are out there with their fangs out right now. we knew this would come, but they never dreamed they would be talking about this plan, and now they are not just talking
about it, they are talking about implementing parts of it, and they are in shock. you ain't seen nothing yet if you do not think the savagery in the next few weeks putting the heat on these guys in congress, from everyone of those people are going to lose when we dump all the tax expenditures and give the people of america what they needed, a tax code with a flat 8%, up to 70 grand, up to 2010, it is all there. it is all in a 64-page report, and it is still there and it is not going away. >> our hope is during the lame duck you cannot rewrite the tax code in 48 days. for us, the american people
should really be disappointed, why the rest of the country has been having what at best can be described as a very fragile economic recovery, in washington all they have been having is an election. any business, if they were facing the equivalent of a $7.2 trillion in deficits, and that is what we have over the next decade, that is what the economic effect of this will become, the expiration of the bush tax cuts, the payroll tax, that patch that was put on the amt so it won't hit the middle class, the expiration of the unemployment benefits, the sequester, which was a mindless, senseless across-the-board cut came across because the failure
of the supercommittee, and no business tries to balance their books doing it across the board. you do it surgically and try to do things that have the least adverse effect on productivity. today we got 48 days left, and went through this election. isn't it amazing that during the election, at all four of the debates, the words "fiscal cliff" were not ever mentioned. >> no one mentioned the solvency of medicare. to think the debate took place and nobody ever got into those two big things that are driving this country. >> every day, every news organizations say "in 48 days," "47 days," and what is the senate doing? the senate went home. they are going to only work 20 days. if this was a business, all hands would be working and trying to resolve this issue. our best hope is to get some
kind of framework deal that will call for $4 trillion worth of reduction over the next decade, but it has got to have real substance and real clarity for the markets to think it is real, it is going to have to have been a significant down payment, it is going to have to have a real timeline, and it will have to have a fail-safe provision that is realistic, not one that somebody is going to try to walk away from this sequester. i would say it has to have somewhere around 67 votes in the senate to override it, so it will be hard for these guys to squirm out of it. >> you think that dividing lines have already taken place. if speaker boehner and the president continue to butt heads over the ideas of raising this tax rates for wealthier americans, extended the bush tax cuts, how do they reach the middle ground? >> tax rates for wealthier americans are going to go up.
that is just a fact. that is going to happen. what we should be talking about is how can we do it where it has the least adverse effect on productivity here in this country, where it has the least adverse economic effects. whether you do it by rates or by reducing the spending and the tax code, you are going to have to do it. it could be a combination of one or the other. i will give you examples, you could check the value of tax expenditures at 20% and then
measure them down to 0% for the most wealthy, and that would generate the same amount of revenue as raising the tax rates to 39.6%. you could put up this thousand- dollar cap on tax expenditures. 91% of the money would come from people who make more than a $250,000, and would be progressive, because most of the money would come from the top 81%. it is very progressive. there are lots of way to skin a cat, but what be got to do is talk about it because they are plenty of options. the point is we will have to have some revenue, but you got to talk about cutting spending, because that is the biggest problem. we had about $1 trillion of revenue and $3 trillion of spending cuts. >> remind us if you can about the medicare changes, the entitlement changes you talk about in your plan, and now republicans are saying have to be part of the conversation as they meet at the white house today. >> it is not just simpson- bowles. it's domenici-rivlin, and pete domenici and alice rivlin did a wonderful job. there's a lot of stuff to play with.
no need for further hearings of any kind. i thought what was an interesting thing in the tax expenditures, 1% of the american people use 25% of those, and 20% of the american people use 80% of them. figure that baby out, and guess who is getting the end of the pie. 20% of the american people are getting 80% of those 180-plus babies, put in there by most of the skilled lobbyists at the most appropriate time of social engineering, and only 27% of the american people itemize, so 3/4 of the american people never heard of that stuff. who is howling? "home mortgage interest deduction -- what is going happen to the housing industry"" it will survive because we said
take it. who is benefiting from a million bucks in home mortgage interest deduction? we set it to $500,000, and then get a 12.5% non refundable tax credit to everybody, which helps the little guy. if everybody would quit talking about the little guy, the little guy is the guy that is going to get hosed in this process if you do nothing. there is not any question about who is to get it. when the tipping point comes and they say you are dysfunctional and we want more money for our money, we know you are addicted, you have borrowed $16 trillion, so we know you want more. you borrow $3.6 billion a day, and 41 cents every day on every dollar you spend. we are going to get your money, and an interest rates will go up, and guess who gets hammered? the middle class. the fakery. >> you have some groups, and you've heard complaints, including the charitable community, very worried about
what happens. how would you handle that? >> we tell them to read their report, which is a sick idea. everything failed -- read this. it is 64 pages. it is in english. all these are sick things to look at, and you take a charitable deduction, you put a limit on it, and give him a 12.5% non-refundable tax credit. we knew we would be savage and we know it has got to get much more intense because when we put this baby in, these groups that together and just laughed. they had a chuckle. ha-ha. it ain't funny anymore, and now they are really, really smoked. >> people in this town talk about the need to get rid of earmarks. earmarks are $16 billion in the appropriations bill, but compare that to the earmarks in the tax code. that is $1.1 trillion a year.
that is what they are not talking about. we have to get serious. we have got about $2.3 trillion worth of revenue coming into the country. we're spending about $3.6 trillion. we got about a $1.3 trillion deficit, and this goes on as far as the eye can see. we have got to grow up. america has got a real problem. if we do not change, and we just take the theory and stick our heads in the ground, it will not be long before all america will be able to do is take care of a couple of old coots like me and al and buy a few tanks. if you like education, if you think we should be investing in research, if you think we should be doing something about
this $4 trillion of deferred maintenance we have on our highways and bridges, then we'd better grow up, and we better understand that we have got to make some cuts throughout this budget or we will not be able to invest in anything that america has to invest in to be competitive in the future and in a knowledge-based economy. >> something has changed since december 2010, and that is the kind of support you're getting from some in the business community. are you satisfied with the level of support, and are those business leaders going far enough in offering specifics, what they are willing to sacrifice, whether it is corporate tax rates that may have to fall by the wayside?
>> i will say it again -- we would not be here if it was not for the peterson foundation. they laid the groundwork. we stand here on their shoulders, but they made it possible for us to have a voice in this matter because people were prepared to listen. so al and i did help form this fix the debt campaign. i hope everyone will go to our website, which is fixthedebt.org. we have over 300,000 people that have already signed a petition, trying to tell congress, please get back to work, stay there, get a balanced plan, put our fiscal house in order. we have close to 100 ceo's today who get it. they know if we go over this cliff and we do not get a deal that we are likely to go back into recession. they want some clarity.
they want to be able to understand what their future tax rates are going to be. they want to be able to plan. right now capital is on strike. when capital is on strike, you are not going to create any jobs. that is why they are saying, wake up. we are prepared to make sacrifices. we are prepared to do our part, but we have also got to address the spending side of the equation to get rid of these debts. >> do not forget the extraordinary progress of dave cody. he said, "who are you people? is this the way you run your government?" he is tremendous. but the real escape hatch that i have noticed is people come up and say i am ready to do something if everybody else will because they know the escape
hatch. >> you know what this reminds me of? i just finished five years as the president of the university of north carolina, and there was a nobel prize-winning scientist and his nobel prize- winning project was running out of money, so he turned to his team and said, we are running out of money and we have got to start thinking. that is what america is. we are running out of money, and now we have got to start thinking. we have to make the hard political choices. if we do, we're going to be able to compete and win against any nation, but if we do not, we're going to stay on this path and become a second-rate power. my generation got us into this mess. we have got to get us out. we cannot wait until the next generation. >> you have the president and john boehner in the room. what is the advice you give these two men as they begin these conversations? >> sit down, have a beer, quit joshing each other, quit listening to the babble from the right and the left, saying we're throwing the old lady off the
cliff in the wheelchair -- [laughter] i meant grover. watering the earth in his white robes, telling people they raised taxes. that was a freudian thing there. what can grover do to you? he cannot murder you or burn your house. the only thing he can do to you is defeat you for reelection or put some jerk in the primary, and if that means more to you than the country, you should not even be in the damn congress. [applause] >> your advice? >> compromise, do the right thing. now is the magic moment. it is our responsibility. >> i want to thank you both.
we are out of time. the conversation is going to continue here at the summit. thank you again for joining us. thank you to the two of you. i appreciate your work as well. we will be right back in just a moment as we continue here at the fiscal summit. [applause] >> you help with this some major economic events in your careers. what would be the impact on the economy if we go over the cliff? what if policymakers kick the can down the road for several months but failed to address the gap between revenues and spending policies and fail to
live coverage as ted koppel talks about the region of network news. mid >> the mindset of the world's well into the mid-1990s was that why airline -- wireline access was the key to understanding competition in telecommunications. the intriguing part of the wireless story is how very she people inside the industry, that is why the mackenzie report cannot the way it did. it is not just judge greene who did not understand the potential of wireless. this was the entire industry except for a few visionaries. what turned out to be the case was that the hope that some people had that you can have a
robustly competitive fixed line access industry where half a dozen companies are offering huge telephone service over wire, that vision was mistaken. >> 30 years later, was it a good idea to break up at&t? they discussed the pros and cons tonight at 8:00 eastern. >> more now from the discussion on what is called the fiscal cliff. chris van hollen participate it and discuss chances that the republican controlled house will go along with an agreement. this is about one-half hour. >> the challenges are pretty clear. we have to focus on accelerating the economy and job growth. that means avoiding the fiscal cliff, extending middle income tax cuts. we should talk about the payroll tax component, which is
a significant part of the fiscal cliff. we shall look at a one-year extension for some other mechanism that delivers the same economic benefit. >> $95 billion is the price tag. is that something the country can afford when the goal is to bring the deficit down? >> the goal is to make sure we do nothing to harm a fragile economic recovery. then to lock in a long-term path to credible, stable deficit reduction. we are trying to accomplish two things and once and make sure we do not do anything in the short-term to place a drag on the economy. we should try to boost a fragile economy. >> how much latitude as the president have to do in terms of the negotiations?
is he getting pressure from the democrats? does he have a free hand to talk about painful things like scaling back medicare in certain ways to generate savings there? >>the president has the confidence of the micrococcus in the house and senate. that does not mean there is a blank check. everyone will want to represent their constituents in the best way. there is a consensus the president has laid out the challenge clearly. and the president has pointed out that the approach he has taken was not some secret during the campaign. the president was one person who was transparent about how he would approach these issues and laid out a clear revenue plan
in terms of allowing the top rate for high-income individuals to return to clinton era levels. he had a tax reform component that low with the values of deduction and a clean way by dropping the value from 35% to 28%. he has put a plan on the table. we have not heard a plane from our republican colleagues. we heard a good turn from speaker boehner. we have not seen a particular plan with respect to the other issues -- the approach we believe we should take to health care and medicare is to contain cost in the overall health care system. the per-capita increase in cost in the private health care system is running higher than in the medicare system transferring costs onto individuals and not a stress the fundamental problem. move away from a fee for service system in medicare. that is the better way to go.
>> the run ideas past few that have been floating around the hill raising that trigger in terms of higher taxes for those earning a million dollars a year or $500,000 per year. how will that play? how will that play in the democratic caucus? >> people will consider various options. make sure we boost job growth and make sure we put us on a path to long-term sustainable deficit reduction. the issue is what is the revenue to cut? look at the simpson-bowles plan. look at the overall framework. look at the revenue component of how they get to their
deficit-reduction numbers. the simpson-bowles revenue is more than what the president has put on the table. it is important everyone recognized that. if our goal is deficit reduction over the long term, what we have to decide a front is how we can get the revenue in the cuts. the issue with going to a million-dollar threshold is that means less revenue coming in the next 10 years to hit that target. he will have to find it somewhere else if you are going to take that a balanced approach to a long-term deficit- reduction. >> $1.6 trillion. is that the target that you think is the right target in terms of the revenue?
>> i do. i emphasize the fact that the simpson-bowles framework -- have a good framework in the sense that they have the right ratio of cuts to revenue. they recognize that their revenue estimates included in their starting point. that was the starting point for the simpson-bowles calculation. that is why they get the deficit reduction numbers they do. if you were to take up that assumption, they are about a trillion dollars short on their own deficit target. it is an important piece of their plan. comesesident's proposal in a little bit less on revenue. 1.6 trillion is a good target. less than simpson-bowles. look at his overall plan. >> maybe his negotiating position would be enhanced if we went over the cliff.
>> i do not think we want to go over the cliff. we are trying to avoid going over the cliff. the real issue is whether our republican colleagues are willing to make those tough decisions before january 1, or whether they will only face those decisions after january 1. the president laid out a clear plan not just since the election but before the election for how to get there.
when i say that speaker banner has set the right tone but the jury is still out on the substance of this proposal, let us see the substance. the president has been transparent. let us see what the speaker is proposing because if it does not hit those targets, then we are not going to accomplish our goal of long-term deficit reduction with inappropriate revenue component. it would be really bad if we just kicked the can down the road here again. between what happens in the next six weeks and what happens over the following six months in a structured way, we have to lock in some assurances we will accomplish the goal goals -- a job growth and a sustainable, credible path to long term deficit reductions.
>> what roles are markets playing in this conversation? >> there are some investors out there. many are on all tied to the fiscal cliff. >> there are lots of factors that go into the nervousness in the stock market. there are these twin objectives that are weighing on people's minds. one is people do not want to much deficit reduction rain now because it would have a negative impact on the economy if we go over the fiscal cliff, from a numbers point of view, when you look at the congressional budget office 10 years out, you have your deficit to gdp ratio down below 1%. peterson institute has this chart on their website. mathematically, that would be the way to go. but it would have a detrimental impact right now on the economy. it would be a major drag on the economy. the trick is to accomplish both these objectives.
one is to prevent the drag on the economy. the president's jobs plan should be part of that. that is part of the six-week discussion work immediately beyond is something we can talk about. we have got to do this piece. that chart illustrates there is an important revenue component to this. if you do nothing and go over the fiscal cliff, you are talking about $5 trillion in revenue over the next 10 years. the president's 1.6 trillion looks reasonable. if you go of the fiscal cliff, you get about $5 trillion in revenue over 10 years. the president says the list to about 1.6 trillion of the next 10 years. less revenue than simpson- bowles. >> you also get another $600 billion in savings from the pentagon. what is your view about whether this country should be prepared
to go beyond the $487 billion that the president initially targeted? >> i do think there are additional savings to remain in defense spending. it is important to be clear that those reductions were reductions from projected increases. it lot -- it was not a reduction from the baseline. if you go off the fiscal cliff, it is not another $500 billion. that was part of the simpson- bowles framework. the sequester is an irresponsible way to do with cuts whether it is defense or non-defense.
in terms of the magnitude of defense savings, five of hundred dollar billion cuts for 10 years is excessive. there are additional savings to be made in defense. senator levin has said another heaven -- hundred dollars billion. the key is to -- we should not have the budget decisions driving these decisions exclusively. -and not be the main component. what is our military strategy? we are doing lots of things in military that are still looking toward the cold war strategy. we need to focus on what our strategy is for this century and align our resources that way. >> you played paul ryan during the vice-presidential debate. you know the paul ryan budget
plan as well as paul ryan. you know it well. what can you say about the plan knowing you were critical of it you, proposed it? what do you see in that plan that could be the basis for middle ground between yourself and paul ryan moving forward? you will be part of these negotiations. is there anything in the plan that could be the seed for compromise? any area that you would be willing to negotiate with republicans attacked there is very little overlap between the democratic budget and the house republican budget. there are some areas of, for its --, and brown. this is a point i want to in and says. this term is used a lot. stocks this would be great to find common ground.
compromise will be aetna and require. the need to have to accept some things you do not lead and in exchange for moving forward and accomplishing a national objective. compromise has been in short supply. hopefully, when this will allow us to move forward. it needs to move forward in the context of an understanding that these issues were central to the vice presidential campaign. there are some issues that on the sidelines. this is that one of them. fiscal issues, but issues, tax policy issues were debated. >> the president has a mandate. >> on this set of issues, when it comes to asking higher-income individuals to contribute more to deficit reduction so we do
not have to back the other part of the budget that he has a mandate. he was elected. you see all the exit polls that indicate a majority of americans support that idea. you have got at least 50% of voters who believe we should have higher-income individuals contribute more. you have a good chunk of americans said say we should raise revenue generally. it is important to understand the president, myself, others believe that the balanced approach that has been laid out provides the correct framework for approaching this problem.
others have entirely rejected that framework. they have said that simpson- bowles' from work is not the way to go because of the revenue piece of it. >> do you sense something different this time around? you were on the supercommittee. i saw your frustration when there was no deal coming out. is the something tenderly different now? >> there are two bank debt are different. it is not a secret. a lot of them made this point in their statement. there are a lot of folks in congress on the republican side who tried to defeat the president. it was difficult to get any kind of cooperation. the president has been reelected. he will be term-limited. i put a stop in that than i to in the structure of the situation. while the fiscal cliff contains great potential risks, it also is an action-forcing event that creates opportunity. it is a combustible mix of issues.
what we do not want is for it to blow up in our face. it presents an opportunity. the president has laid out the challenge on the revenue side. it is important people listen carefully to what he said. we want to avoid would go to the fiscal cliff. he has said that he will insist that higher-income individuals contribute more toward reducing the deficit. let us think about if we were to go into january 1, january 2. all of these things reset. the president goes on national television every day and says -- the american people -- i am trying to provide tax relief to 98% of the american people. 100% of the american people will get tax relief on the purse to hundred $50,000 of income. our republican colleagues are saying -- nope. nobody did any tax relief
unless higher-income individuals get a bonus tax break. that is the position they would be taken. that is the wrong policy. it is politically unsustainable. i hope our republican colleagues recognize that is unsustainable between now and the end of this year. but >> the good news is we have one of your republican colleagues waiting in the wings to talk about these issues. chris van hollen, thanks for joining us here at this peterson foundation event. good to see you. best of luck to you with the negotiations to come. we want to invite congressmen peter roskam. good to see you. also, a member of the ways and means committee.
he served in the illinois state senate with president obama. fed me give you to respond to what you have heard to chris van hollen on the notion of taxes and republicans being prepared to extend the bush tax cuts for those earning less than $250 a year to attack there is ambiguity on the democratic side of the aisle. there is something that chris did not say and that we have not heard from the president. the ambiguity is -- who is risk that there is a 250 description. there is a 500 description. there has not been a clear discussion on the impact of the past two entities. i represent suburban chicago and many other folks across both sides of the aisle. i represent entities that are organized and very little
discussion beyond the bumper sticker rhetoric on the impact of pass-throughs as relates to these higher rates. the second thing is the -- to notice what we have not heard from the white house? but we have not heard from the white house is a discussion of the other component that is -- where are the spending cuts and the savings? there has been a lot of discussion about that. there has not substantive discussion about where the cuts are. the president described a balanced approach as a 1-to-3 revenue to cut ratio. we have been having the conversation on the revenue side. there has been no offering on the part of with these cuts are. house republicans are here, ready to be part of this discussion and part of the solution.
we are interested in where is the substance as to relate to cuts? >> will you be disappointed if the president does not offer something substantive at the table? >> my hope is that he does. my hope is said he recognizes the parameters of his own rhetoric in the past and the framers that he articulated. my hope is that when he meets with the speaker and the other leaders that will be part of the discussion. i would be surprised if the conversation is completely dominated all on the revenue side. that would be a lot opportunity on the part of the president. >> will republicans be able to look at the revenue issue and go beyond closing deductions and
loopholes? maybe not 39.6. what if that 35% goes to 36%? it would violate what speaker boehner said is his line in the san. >> we are talking about symbolism and gestures as opposed to really trying to craft a good policy. is that a waste of time in a way? if you believe that raising rates is going to have an adverse of pounds on the economy, and on the democratic side he, do not get the sense that they have the same bubble of believe as it relates to economic growth. it is driven by party dogma. why not eclipse this whole thing?
why not have the president come in and saying -- real litigating the 2001 and 2003 return the past is old news. let us extend the rates for another year and drive this ward tax reform. this could be the transformational moment that was the ark of president obama's campaign in 2008. the positive-winning nature. the hope of it. there is an opportunity to trenton this thing. maybe there is a possibility that the president did not recognize how close he came to a deal with speaker brainer during the debt ceiling talks on the grand morning. when this comes close to him again, rather than thinking it was going to be a better deal if you wait longer, maybe there is the possibility of him seizing not. i have seen this characterization in president obama when i served with him in the illinois senate. i have seen him reach to a
moment that was significant. there is a possibility he could do that now. >> if the grand bargain that president obama and speaker boehner were talking about two years ago were put back on the table right now, with the house republican conference that speaker boehner? the $800 billion. >> through growth, deductions, loopholes, so forth. i have not what this vote. >> she may have to. >> tell me about that. the house republicans are poised to move in that direction. is the speaker hunting out a head of the pack? i do not think so. he is leading the house in a way. he is reflecting what a majority of house republicans are. >> what is the speaker doing
today? he went out after the president's victory on tuesday. he went to the cameras, offered sincere congratulations, and laid out a pathway for a way for us to get out of this. it was a good way. there is some language about compromise and common ground. we have to figure out a way to avoid this fiscal cliff and all the drama that would ensue if we go over it. the speaker laid out a pathway and said to the president -- lead us on this pathway. we are telling you we can come up with more revenues. take the victory lap on receiving additional revenues. the republicans take a rare victory lap on keeping these
rates low. he eclipsed the whole scene. let us move into the tax reform agenda. the chairman of the committee has laid this out of the next two years. >> let me get your take on with this conversation might go. do you have a preference? do you think it would be more politically feasible to cap those deductions or you do not have to pick and choose which ones survive and which ones do not? do we need to look at these individually? >> you cannot come up with a tax reform package during the lame-duck session.
that has largely been debunked. i would be very open to having more input on that. and figuring out where are our members on these things? remember when harry reid was able to sit back in a corner and say this is all very interesting. let us talk about what can pass the senate. it had the sense of clarifying the conversation. the fluff with go to the wayside. it is important for me to get a sense of where our members are. it is the type of thing that you want to have a more robust hearing process, and not have something that is written in the speaker's office in the ways and means committee and senate finance fully back. >> if you push it to 2013, and allow the jurisdiction to work their magic, there is a sense
of kicking the can down the road. tough choices need to be made known. the markets want to see this done. business leaders say -- is that need to get this done. >> there is no question that is when the market is calling out for. that is not unreasonable. the final disposition will not conclude december 31. much like the markets, congress is going to have to do more work in the next fiscal year. if the expectation is that this gets done and there is a pretty bow on it december 31, they are pumping sunshine. it will not happen. >> pumping sunshine. everyone got that? it does not sound like it will happen. i have heard from a lot of republicans -- the democrats go further on medicare, we may be
prepared to go further on the revenue side. what would you take as a sign of movement on the democrats' part in the administration's part when it comes to entitlements programs? is there a marker for you that you will be looking for? >> there is an attitude or a shift for a disposition that we are looking for. that is to see substantive -- put something substantive on the table. i did not over characterize how underperforming the white house has been in terms of a description and a disclosure of these types of cuts. to the extent that the president is feeling a mandate as to the extent that the president is feeling a mandate as it relates to taxes, house republicans are feeling equally vindicated as it relates to passing the ryan budget, king on medicare, and the third rail of politics, and coming back with the second biggest house republican majority since world war ii. there is a sense of the house
gop in the last congress cross ed the political rubicon. that was to take the treasure of entitlement program everyone loves that will be insolvent outside of a decade, wrestle it to the ground, , with a revenue, go to the public, win reelection and come back and say -- there is something robust air. -- there. there is something concrete. what we have not said is -- it is our way or the highway. what we have said is -- or is a way forward that we think is a winning issue from a political point of view. it did not cost the house republicans the majority by taking the issue on. there was a lot of work and soul-searching and hand wringing internally before we presented the bill on the floor. when we did, you got this sense of -- ok we have done something. let us move forward. in terms of lines of about sand or markers, we are looking for a raise of an eyebrow or a handshake or anything out of that acknowledges that these
entitlement programs have to be part of the mix and that we cannot continue to say -- it is all fine. it will go away. >> it may have to be a multi trillion dollar rates of the eyebrow. -- raise of the eyebrow. that's me share with you -- we have questions from facebook fans and foundation supporters were elected officials. you get to be the beneficiary to. >> going over the fiscal cliff is crazy. it would have such an adverse impact on our military. secretary panetta has said it is devastating to the us military. it was meant to be a provocation for action. it is a successful provocation for action. everyone is talking about it.
we will figure this out and get this done. in terms of using it as policy, i would argue against it. >> another question -- why not adopt simpson-bowles? how would to create a better plan? why not cut to the chase, these folks negotiated a bipartisan plan. is it the solution? >> there is a brightness to simpson-bowles. there is a punitive nature to all of these talks. i-- there is a cumulative nature to all of these talks. i look at the work that vice- president biden had. -- led. i look at conversations between president obama and the speaker as foundational and the work of a supercommittee. was it disappointing? yes. you build on them. the reason i was not in favor
of simpson-bowles and you did not see house republicans in favor of it was because of the same question as it relates to taxes. we think we have offered an alternative so the president can get his revenues that he needs. take the victory lap. say i have got these new revenues that are coming in as a result of willingness of the republican congress to work with me. take the victory lap. eclipse the scene and move to tax reform as fast as you can. >> chris van hollen suggested the president had a mandate from the election on the issue of tax breaks for the wealthy. for the wealthy. do you subscribe to that? >> no. if the president had a mandate, nancy pelosi would be the next speaker of the happen. -- of the house. that will not happen. >> what about your outlook? how confident are you right now
as these negotiations began at the end of the day there will be a deal that you and your colleagues can support? >> very confident. there is an opportunity the president has to lead the country in a way that he wanted to in 2008. there is a benefit to limited government. the president did not have it in two dozen 9. now they're in it -- in 2009. now there is a restraint influence, and there is an opportunity for both of these men, the president, who i knew from my days in the state senate, the speaker of the house, and their dispositions to come up with the remedy. >> would it be better if there were just a two of them? >> they have temperaments that can get to yes, and that is a good thing. >> thank you for joining us.
one of the players in these negotiations. thank you for your time for the republican perspective. >> live coverage as ted koppel talks about live it network mays. at 8:00, the 30 years since the breakup of at&t. c-span3 has global pandemic prevention. that is tonight. >> how does one adequately express his feelings about a special friend? when that friend is also the a national hero of
unimaginable proportions and a legend whose name will live in history long after all here today have been forgotten? >> fate looked down kindly on us when she chose neil to be the first to venture to another world. and to have the opportunity to look back from space at the beauty of our own. it could have been another, but it was not. it was not for reason. no one -- no one, but no one could have accepted the responsibility of his remarkable or accomplishment with more dignity and more grace than neil armstrong. he embodied all that is good and all that is great about america.
>> war from the memorial service for neil armstrong thanksgiving day on c-span at 10:00 a.m. eastern, and then a behind-the- scenes look at life as a teenager in the white house. after 1:00, how scientists are using game skills to solve war problems. before leaving for the thanksgiving break, congressional leaders said negotiations on avoiding the fiscal cliff would continue. members are trying to figure out how to avoid tax increases and budget cuts settled in january. next, ideas on taxes. this is just under 45 minutes. >> ok. i assume we have all been introduced already. what i am going to do is let
each of them tell you who they are, what organization they are with. since we have people, a short amount of time and lots of material, we will try to get it short answers. et's start with the fiscal cliff. say who you are and where you are from and what you would like to see congress and the white house to on the cliff and maybe what you expect out of the meetings today. >> what i would like to see first and foremost is a deal as quickly as possible. the deal should extend current policy to the greatest extent possible with an intent to do in time to reform in this spring. >> i am co-chair with my friends tea to a sitting in the front row. -- pete dominici. on the fiscal cliff, we should not go over it. it sure would -- it would be economically a bad thing and a demonstration our government is not working.
we should put in place a framework in the lame duck session that will specify that the cliff is postponed in some way. that the regular committees of congress in the next session should bring back a plan that would meet certain targets. those targets -- this is for the big deal -- for the grand bargain. they would be specified like reconciliation instructions. the bill that came back would follow an expedited regular order. now going around the regular committees. it would be subject to a majority vote with no filibuster or amendments. and there should be a fallback position, which might at best be something like some symbols.
in any case, it would be a step towards solving the problems. not another cliff, but a partial solution. >> i think we should not go off the cliff. i think we should shut off the sequester and extend the middle class tax cuts. we should put money in getting teachers back to work. putting money into infrastructure spending to help the economy going. that is something we will have to do eventually. this is the ideal time to start doing it. we should extend the payroll tax holiday or do something like that. that is not the end of the story, but i think those are things we should just do right now. >> i think we need to separate the problems. we have an actual problem of near-term fiscal contraction.
we should solve the immediate problem. we have released an article. one thing we can do in the short term is and the high end tax cuts, plow it into economic support for the next two years and work on the longer run issues when the start to threaten to become a real problem. >> we will review the fiscal cliff as something that needs to be taken care of immediately. we look forward to extending all current tax policy for a good period of time that will allow congress to do fundamental tax reform. we want to see all tax policy extended. we would turn of the sequestered for defense, take care of unemployment. all need to be settled quickly and have the broad framework for entitlement reform and move to there very quickly in the next session of congress.
>> the big sticking point is between speaker john boehner and can they go back to 35.6%. is a crushing to the economy if it does do that? if not -- say there is a move to 36%, 37%, some compromise to get the massive problem over with. everybody wants to sequester off. there are a lot of agreements and the other areas. have we not moved to a point where there is an agreement to let the tax rates go up slightly? >> i think it depends what problem are solving. if you're asking what you do now between now and the end of the year, it is baked in the capable have the surtax.
taxes on the rich will go up. we have an economy that is not growing very well. i am quite worried about the impact of letting too much on it. i would advise against it. there is no reason to have higher marginal tax rates per se. i think we should go there first. >> do you think we can get the revenue -- let's say the ballpark for this cliff agreement -- this is assuming republicans would accept this. can you get there without a marginal rate increase? is there enough on the table in
terms of loophole elimination's to give that down? >> there is. i think the fundamental question is, what is the objective? i do not know why republicans would be talking about raising taxes when there is no agreement on spending cuts. the real issue here is we have a spending problem. to the extent revenues are low is because we have a growth problem. if we are going to talk about raising revenues, first we need to solidify the economy. doing it through tax hikes is the wrong way. if we are the wrong solution. if we want to get working and moving together, we really need to be talking about any kind of revenues -- from my perspective that happens through growth. we need to be talking about revenues and spending cuts that need to go together. let's not forget that we have a republican conservative house. we need to talk about how we will go there together. >> either of you guys can jump
in here. try to outflank each other. >> can i get to the right allison? >> weaken the playing musical chairs the whole panel. what is a fair number to put into the fiscal agreement to get to the revenue increase. revenue needs to be there at a certain level. should there not be more talk about fiscal cuts? >> you know, i think, one, we have had $1.70 trillion in
spending cuts already. the first part of this process was spending cuts. that is not to say from my perspective that there should not be more spending cuts. we just put out a plan the other day to do more with medicare, to pull out efficiencies in medicare. we think you can do that without hurting beneficiaries. i also think there are things we ought to be spending more on. you can have than spending cuts in the window. that should be part of this. >> the fiscal cliff -- we should not be talking about closing the deficit in the next couple of years. in terms of spending cuts or says revenue increases, i would say over the next couple of years we should only allow
those things to happen and provide a minimal drag on economic growth. to my mind what would provide the most minimal drag is the the bush tax cuts. i can go away. we are not talking about extended unemployment insurance and the payroll tax holiday. those would have a much bigger drag. i think in the longer run, the principle of our plan was to recognize what is the most important context in the past couple of decades which is a staggering rise in income inequality. yes, we think revenue increases should be progressive to reflect that. i also realize the key social insurance programs, and they have been the only source of economic strength and security over that time we should not start walking away at those things. we need reforms of these big spending programs so they do not generate these enormous
deficits. >> i think that is important on the tax side. what we are looking at is not a pro-growth or what is best for the economy, and a solution. we are looking at hitting arbitrary revenue targets. we need to be thinking about both sides of the budget, particularly entitlements. there are a lot of weaknesses and challenges in the retirement programs conducted here not a real sentiment. too many americans live under the poverty level because of their benefits. let's fix that. we need to be talking about reforms that make these programs affordable,
sustainable, and a strengthened. >> we are all trying to move you on to the longer-term reform. i think we can all agree that the economy is growing too slowly right now. the main point over the next few years is to kick the economy growing faster. there are a couple of things you can do about that. one is not to go over the cliff and go back to recession. the second is put in place and strong grand bargain that does the two things done have been mentioned, broadbased reform of the tax code that remains a progressive, arguably more progressive, and slowing the growth of entitlements. he cannot get there unless you do those things. he cannot get their too fast. in our plan, we put up front an
additional stimulus to show that we realize the economy is not growing fast enough right now. >> let me get the answer to this question from the audience about how we can get through the long term fiscal challenges. let's go to the results and see what people have to say. it looks like spending cuts and revenue for income above $250,000. here seems to be a lot of consensus for sharing the pain more broadbased. >> the arithmetic drives to there.
if you are serious about stabilizing the debt, there is no other answer. >> i would challenge that. our plan does balance the budget. we have a tremendous problem with debt and spending. >> if you assume growth, it gives you more revenue. >> we do assume growth. we have a plan that makes it easier for every american, including those of low income. we proceed right away with the entitlement reform. one of the keys to getting stronger growth is reducing the debt overhang we have. there is no doubt in my mind that that is having a negative impact on the economy. >> i want to move on to the specific elements of each of your plans.
how do you put a mechanism into agreements that enforces the action everybody seems to want. everybody talks about a fundamental tax reform and income at the form. the last move is the sequester, which everybody hates. how do we make that happen? >> to get it done, you cannot go over the fiscal cliff. the fundamental market reactions will be severe. we will go into recession. the short run images our ability to recover. we cannot do this between january and august. 2014 is an election year. if we do not do it in the claim
and period of a new congress, is do-or-die time. >> how do we get to the next thing? >> we are in a different situation. let's not do the debt limit. we are in a different situation. there is no forcing mechanism that will make the political system safe or deal with this problem if they do not want to. the realize they have put it all for a long time. we have been reelected president and a partially new congress, which is much more aware of the problem and the need to compromise. here is the moment to get it done. >> is not quite clear if you can legislate something on the fiscal cliff.
>> two things. i think you need to do something in this period that is a down payment now. you cannot say we are going to do this mechanism and have nothing. if we are going to do tax reform in 2013 and something bad happens, there has to be and will to do it. the country has had legislation for a couple of centuries without having enforcing mechanisms. the question is whether the republicans, democrats, president, congress can come to an agreement. there is to been much focus on the enforcement mechanism. in the end, it is just whether there is the will to do it or not. >> a couple of things. we should not hold solving the immediate problem hostage to
some trigger that will solve the long-term problem. the real problems are immense and they are real. everybody believes it will slow the economy down. there seems to be no enforcing mechanism. the complaint seems to be, they are not harming us. it is really hard to argue that we need to be locked into something when there is no evidence that the budget projections of the future are harming us right now. in the 1990's, there was a market signal an interest rates started to go up. people believed the deficit was given to the economy. we do not know if that is going to kick in, but there is no reason to fight against this hypothetical increase when we
have these problems now. >> the only advantage we have is that we are in a better situation today than greece and southern europe. >> is that a fair comparison given the size of our economy and our growth rate? greece is a very different situation. spain, france, italy -- they all know they have a problem. they thought they could go on borrowing. he cannot count on the forever and we cannot count on this forever. >> the deficit will look better next year as the economy starts to improve and we are freezing out about a debt problem that does not really exists. >> any sensible projection of the next decade since the debt to gdp level continues to go up. we are so immune to the
arithmetic that we continue to do what we are doing. you want to focus on cutting transfer programs. he did not want to cut the core functions of government -- national security, infrastructure, education. you focus on entitlements and you stop trying to slash discretionary spending. >> suppose we get past the fiscal cliff and we get it to the next congress with a bomb in a second term, republicans less -- obama in the second
republicans less powerful in the house, but still in control. you have your plan that has multiple wish lists, not all what you want to get done is going to get done. pick out one critical thing from your plan that you think is the most important agenda item for the next congress and administration to do to help the economy and the debt problem. >> from my perspective, it is attacking entitlements and improving the benefits seniors can get from these programs. we need to focus on health care. it is the most robust in the most talked about. the american people are willing to consider changes to health care. that would be changing medicare to fix the finances.
rather than taxing the rich, i would reduce the subsidies, make them painful premiums. if you are an affluent senior to medicare, that can help fix the finances and transition to a more marketable, patient- centered approach. we would maintain services as they exist for seniors today. give them the option to keep what they have caught and give them the option to change. that is crucial. we have to also tackled medicare and medicaid. >> what is the critical thing to do in the next congress? >> first, ensure a full economic recovery. if we make a full economic recovery and we do want to get to work on the budget deficit, recognize the staggering rise in inequality and raise revenue progressively. there is conventional wisdom that taxing the rich cannot
give you to been far. that is not true. they have an extraordinary share of income growth over the past 20 years. i would also say in regard to the health programs, everyone knows it is the failure to maintain system-wide health costs that is the budget deficit out of control. we do some easy, low hanging fruit budget options. then we say, there were a lot of promising cost control reforms in the affordable care at. health-care costs were falling a bit before the recession hits. the see if it bears some fruit. we should not be cutting public investment. the reason why you cut budget deficits is to preserve your private capital stock by cutting the public capital stock is perverse. sayhe one thing i'd just
this is the public is ready to deal with health care costs right now. the quality of american political consultants is terrible given all be ads run in the last campaign trashing any politician who tried to move at all on health care costs. the most important thing to be done is getting our public investments right. but the constraining thing on that is not the will to do that. there is a lot of support for a lot of the kind of investments people want to make. people vary on how much and what they think is optional. the constraining factor is the revenue. that is what is constraining us from doing that. we need to reform our tax system. we need to get more revenue. most of the revenue should come
from the top. he looked at all of the uproar about letting the bush tax cuts on people making over $250,000 -- you look at the wealthiest 1%, they get that back in a year. it is not that much money when you compare to the rise in inequality and the growth at the top. we need to try to make the kind of investments we need to do. >> there is no number one. there are two main things that have to be done. reform the tax system. we all for a broadening of the base, which would be more progressive. it would raise more revenue from people at the top, but not
from raising their rates. that is feasible and simpson- bowles came out there, too. we need a better tax code. the other thing we must do is slow the rate of growth of the entitlements, especially the health entitlements. there is a good compromise there, too. we need to put in force of the things in the affordable care act to incent more efficiency. we would give seniors a choice between traditional medicare and competition on an exchange. we think those guilty things together on the real necessities. we also have a discretionary
freeze as in simpson-bowles. we have done that. that was in the budget control act. we do not need to do more cutting on the discretionary side. >> we talked about your plan and changing the tax code to the consumption place. talk about how that will work and why you think that is a good idea. >> you want to have a tax code and raises revenue with good growth incentives and is simple. this does that. it turns the entire tax code into a traditional ira. when money comes out, you get taxed. the same rate for dividend interest and capital gains. you get away from a lot of the tax planning and efficiencies from that. we keep seeing top rate at 35%. this is the kind of that system
we need that will promote growth. he tax system does a lot of things. total contributions, he can use it for social objectives. the the paramount issue of this moment is growth. we have tax reform and we have the entitlement reform, but those things have to be done quickly. we do not have the luxury of preventing we can pick the silver bullets and it will all be fine. >> what do you think of the idea of the consumption tax versus the income tax and the fact that it can be progress in the same way? do you think that is true or false? >> i do not think you can get the progressivity of revenue
that way. we want taxes to be supportive of growth. we stole some ideas from the bipartisan policy center. we do some negative that rates for low wage earners. there has been a period of slower overall growth. increasing the progressivity of the tax code is going to stop growth -- i do not see it. we need a well-run insurance system. the idea that tax reform is the way to get growth is not correct. >> the idea that you will
simplify things and get rid of tax avoidance mechanisms by a progressive consumption tax is replacing different pieces of loopholes and creating a giant one loophole that you can try to shift money into. the ira analogy is apt. if you look at the tax return mitt romney released, a big part of the way he was manipulating things to lower his tax liability was the ira. >> it is the base that matters. that is where you get the important tax policy decisions. this is a broader base than we have right now. most of what we do is to
subsidize consumption through the tax code. with a broader base, you can raise a lot of revenue. the race too much in mind opinion. his taxes people on what they take out of the economy. it does not tax them on what they contribute. >> ours is a consumption based tax on income as well. we do not tax people for what they put into the economy. we incentivize them to save. that applies to whether you are mitt romney or somebody who is just starting out. that is important. >> i think that a progressive consumption tax could work and we could move very eventually. there is this problem. you have to start from where you are. we have been with an income tax for a long time.
people will say, i paid income tax on this and now you are saying i have to pay again when i consumed out of my savings. there is a big transition problem. >> it is a non-trivial exercise. when you start with a consumption base, the base is what matters. as a practical matter, it is impossible to have a tax system that is as progressive as the income tax system we have. the wealthy consume such a smaller percentage of their income than middle and lower income people. it can be progressive, but it cannot be as progressive as you have in an income tax. we can argue about the economics over and over. i would just say that demands matters, too. >> let's move on to some other subject areas. we have not talked about social
security. i would like each of your plan proposals for social security. the eligibility age, where you come down on social security? >> as a matter of the substance, if you were going to do one thing, to social security reform. it is really easy. it would send the right signal to international capital markets. it has zero near-term austerity impact. it is a disservice to have the system we have now where we say to people come here is our retirement plan to you. at some point, we are going to slash your benefits. that is a disgrace. this is something we should do quickly. it involves all those things and it is sensible. >> i agree with that. it involves all of those things, including raising the
cap on the tax and putting in another bracket so that it is more progressive than social security already is. the main point is do it now because people need to know that it is going to be there for them. the people who said, it won't run out of money until 2037, people who are retiring in 2037 are already in the labor force. they need to know the social security is there for them. >> is there a place you would put it from where it is now? >> it needs to cover 90% and get their gradually. >> we have a social security reform plan where we do not raise the retirement age. we take off the cap and the employer side of the payroll tax and we shore up benefits that the bottom.
>> josh, where are you guys on that? >> we scrap the cap. the social security problem is a onetime level shift, and utterly manageable problem. it is separate from the rubble where you have rising health- care costs. this is not something that will snowball. social security benefits in the united states -- we are stingy by international standards. we are a rich country and we can afford them for sure. you increase the number of people who are getting social security benefits and you have a constituency to keep them. the idea we should pull the trigger today -- i do not see it.
>> allison? >> first day, we are all living longer. we should immediately increase the retirement age. we should do it for medicare and social security. congress could do that today. i think it's a no-brainer. let's go ahead and do that. let me talk about our social security plan. social security should be means tested. we start phasing it in immediately in our plan. we do not think we should sock it to the rich and penalize them for doing well. i do not think they should be getting full benefits. i do not think mitt romney needs to get social security benefits when he retires. he has that big ira. we should start means testing social security. we make it more like what it was originally intended, which is
insurance against poverty. we do not want seniors to outlive their savings and we do not want them to have a threat of living in poverty in retirement. social security for too many seniors does not give that. we stand in the benefits, but we moved to a that benefit. it is no longer income replacement. it is a flat benefits. it will be there if you need it. if you are mitt romney and you put all of your money in with corzine and you wake up and do not have anything next day, you get a flat social security benefits. he will be able to live above the poverty level. the first one is important. it takes common sense ideas that are on the table. the right and the left have talked about them. we moved into that cyclically -- quickly
and slowly phase in the flat benefit and economic security model. >> for clarification, everyone always says we are all living longer and that is why we can afford an increase in retirement age. not so much. it is highly skewed to high income people. >> on the urgency issue, it has been the tradition to exempt people from social security reform. i will be 55 on february 1, 2013. i am trailing the days of the baby boom. >> i want to start down the line. the first question is, do we go over the cliff or not go over the cliff? do we really get fundamental tax reform and entitlement
reform in the next congress or are we back here next year talking about the same thing? >> 30% chance of going over the cliff. 70% chance of rationality. house and senate ready to do fundamental tax reform. white house standing in the way. we can get real entitlement reform, but i doubt it. the president is committed to the current structure of medicare and medicaid. >> i think we will not go over the cliff. we are too smart for that. the chances of getting a grand bargain that reforms entitlements may not to be the way we have been describing it, but it slows the rate of growth in the future. tax reform and raise more revenue, preaching good. -- pretty good.
>> because the climate is different now, less partisan and at each other's throats? >> the president would like a legacy of fixing this problem and congress would not want to be seen as the impediment to getting it fixed. >> yes or no on the cliff. >> the one thing i agree with doug on is the percentage of the possibility of going over the cliff. have you seen congress lately? people talk about lowering rates and you talk about the consequences for what you have to do to the tax base in terms of reining in itemize deductions, that is where you will jam up tax reform and the entitlement reform.
>> i put a higher chance of going over the cliff. i think the president will be firm on the 250,000 dollars and above on tax cuts. congress will be equally firm. after july 1, it becomes entirely possible. >> there is definitely a likelihood that we will go over the fiscal cliff. i am not happy about it. when you look at it, you have republicans and conservatives that once pro-growth tax reform. into the future and setting aside the fiscal cliff, we have to have the incrementally beginning of some entitlement reform. there are going to be peace, growth, and prosperity for everyone. >> no more panels for us if it all gets done. thank you very much.
thank you to our panel. [applause] [captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> tonight live coverage as ted koppel talks about network news. he will touch on the changes in network news caused by the digital age. that is at 8:00 eastern. >> the mindset of the world well into the mid 1990's was that wired-line access to stop either on poles or buried on the ground was the key to understanding
competition in telecommunications. the intriguing part of the wireless story is how very few people inside the industry -- that is what the mckinsey report came out the way it did, it was not just judge greene and the fcc to did not understand the potential of wireless, it was the entire industry, except for a few visionaries who were regarded as kooks. what turned out to be the case was the hope that some people had that you could have a robustly competitive fixed line access industry, where half a dozen companies ease would introduce service over wires, that vision was mistaken. >> 30 years later, was it a good idea to break up at&t?
a discussion on the pros and cons, tonight at o'clock eastern on "the communicator's." c-span2. >> former obama administration advisers to give their opinions of the fiscal cliff, and peter orszag was president obama's budget director. next, they are interviewed by peter cook for about a half hour. >> >> the fiscal problems and the tax issues. we have some people. we're talking about finding ground. i am talking with peter orszag sa. we have professor martin
feldstein. he has commented on these issues, and donald merrin. we have three experts to talk about these issues. walk us through this minefield and see where they year might be common ground. peter orszag, let me start with you, and the basic question about whether or not tax revenue has to be part of this conversation to begin with and whether the two sites, whether there is more common ground. >> tax revenue has to be part of the solution here, but because of the underlying budget math, but also because of the election that was just held and the desire of at least the administration to obtain that additional revenue.
on the substance, the point i would make is whatever comes out of this fiscal cliff arrangements, i will now step out of the bounds of political feasibility because i am no longer in office, and say the deal is likely to lock in a revenue-base that is in adequate for 2020. it is important we get to a deal and it will include revenue, but i want to lay down a marker that the revenue base we're likely to be locking into makes the budget math very challenging. you'd see that because both sides are relying disproportionately on unrealistic out-year spending caps that in reality will not work and the reason they are doing that is the base is in adequate and they have no way of getting to the reductions to hit their targets, said they plug the hole by ratcheting down
discretionary spending in a way that is not -- >> what is the more appropriate revenue target? >> if you try to do the math on what you can do on the spending side, we need about 2% of gdp in additional revenue compared the current policy, and interestingly, that would come, if we just about all that tax cuts, not just above $250,000 to expire. not that we should do that immediately, but over the next five or 10 years, we should get back to end base that is consistent with the tax code in the 1990's. >> your thoughts on what peter has just put forward? >> we need to have revenue as part of this package. we need to tackle entitlements. we are not going to get significant cuts out of the defense discretionary spending.
in terms of the revenue, i think the key is broadening the tax base, bringing down the tax expenditures. there's a lot of revenue to be had in doing that. i would say at plan that raised 1.5% of gdp without higher tax rates is certainly feasible. >> donald, let me let you weigh in on this. what should be the target of the country wants to get on a sustainable fiscal path? >> the target has got beat do stop the debt growing faster than the economy and have it coming down. where you come out depends on what your beliefs are were spending should be. there are large error bounce around health care spending, which will be grueling -- growing.
when you get people together and they think trees these issues compared -- when you get people together and they think about these things,they think a significant amount of revenue has to be on the table. one of the best ways to go after revenue is think about all the tax deductions, exclusions and what not. a lot of those of the moral equivalent of spending in the tax code. the ought to be in place. >> you have written about this significantly. both the president of mitt romney have talked about this kind of approach. let me ask you about that. can you get the revenue you need by capping those deductions without raising overall marginal tax rates? >> if you stay in today's tax rates and put an overall cap on tax expenditures, deductions, municipal-bond interest equal to 2% of each individual's adjusted gross income, that produces about $150 billion at
next year's annual rate. over 10 years with the economy growing, that is about $2 trillion. you can raise a lot of revenue doing that. >> is what -- do you subscribe to those numbers? does that provide a middle ground solution here when the president says he wants to see higher tax rates. john boehner says clearly not. >> it is a lot easier to say at this level of generality. it becomes harder to enacted. the number of times of with the head of the cbo, senator so and so would call me up and say i
want to talk about tax reform and i would walk in and the head is one talking point which is brought in the base and lower the rate. what are you willing to scale back? mortgage interest, cannot touch that. charitable, cannot touch that. you go down the list. one of the reasons of these new ideas being attractive is a are obscuring what has to be cut back. >> there is still a hard choice there. >> we are not saying we are going to cut out your ability to deduct your mortgage but i will get to keep my ability to deduct my local tax. everything goes into a pot. everybody gets to keep their deductions but you cannot be too greedy about it. it does have to limit the amount they can benefit from it. >> that is the selling point.
of willingness and enthusiasm in washington for respecting those folks. >> the 2% cap -- half of the money would come from people above $250,000, the other half would come from the rest of the population. it would produce about as much revenue from the top as going back to the pre-bush tax rates for that group. it will produce more revenue overall. it would cover the entire population. >> it would violate the president's plans. if you try to carve out a charitable contributions to mitigate the impact, the revenue number will start to fall substantially. my point is not that this is not a desirable thing to do although i think there are better ways of scaling back tax expenditures in moving towards credits. we are sort of at that moment. it is like that falls -- first moment in meetings with i would go to the hill and it was happy talk about tax reform.
it gets harder at the two consequences become more apparent to the special interests. >> the president has repeatedly said high income people have to contribute to solving this problem. i do not think he has used the language only high-income people have to contribute on the revenue side. i do not think he has ruled out something which through based blogging would call for some contribution. >> the president will that out a dent in his budget he had this past year. >> that is right. but he has not in his current rhetoric. he does the said the problem should be solved just by high income taxpayers. >> let me ask about another component. capital gains and dividends. what about that side of it? the folks that what bloomberg
and do a lot of investing are interested in what happens to capital gains. if you move it up to 20% or talk about higher figure, what would happen to investment in this country and how much money could degenerate? -- you generate. >> rates today are 50% for capital gains and dividends. it is already baked in the cake that is going to 18.8% for high- income taxpayers. they are often overlooked in this discussion but it is already a given. there has been a debate about whether to raise them further. i think your -- you're already seeing some evidence and. you will see a lot of timing gains in the short run. in the long run, we are in a range where raising taxes on capital gains has been attributed to additional revenue.
it is something that is likely going to be part of the overall package for distributional and revenue. >> is it a substantial sum of revenue or more political rhetoric? say it moves to 23.8%. >> i forget the exact number. it is a chunk of money. the two of them together is definitely a significant component of what the president has proposed. >> in both cases, there is a strong behavioral response to changing the tax rate. you do not have to realize capital gains. there is a question of what you do to capital gains at death. right now, the tax liability goes away completely. higher rates will induce more people to hold onto a family business or a stock they bought
at a low price. the state tax as well. the estate tax as well. these are all part of the mix. >> how to that factor in as bargaining chips? >> these are one of the reasons why it is challenging for this all to come together. i want to call out the final and he said. we do not have an amt patch for 2012 yet. an irs commissioner has said that without a deal by the end of the year that covers that for 2012, the irs will not be able to process tax refunds until early 2013 for the 2012 calendar year until perhaps mid march. that means a lot of american households who do their christmas shopping our holiday shopping in the expectation they will get a quick refund early in the next year will be caught
out or not be doing as much shopping if they know this ahead of time. this is one manifestation of the consequences of not having a deal of the plays by the end of the year. >> the issue of taxing dividends and capital gains, the politics of that has changed dramatically over the last several decades. go back before president reagan came to washington. we had higher tax rates on the income from savings. economists have been arguing forever that that is the wrong way to go. that it discourages saving, it discourages investment. over time, those rates have come down. to a point where they are lower. i think it will be a mistake to go back in the direction of putting heavier burdens on savings and investment than we do today. >> we have not talked about the core rate at all.
-- corporate rate at all. what about the notion of both sides agreed on lowering the corporate rate. that is just as heavy of a lift politically. >> exactly the same rhetoric and politics. you saw in the recent presidential campaign, one candidate running on a 28% rate, another running on a 25% rate. and did you try to begin out how to pay for it. politicians talk about rolling back loopholes but we look at them, they are fundamental tax policy decisions that havethem,w loopholes, but fundamental tax policy decisions that have been made about depreciation, manufacturing, all of which are difficult to address. >> not that the corporate community is going offer much in terms of new revenue.
>> peter can no doubt say much more about it, cannot make the distinction between the corporate and the unincorporated business and raise taxes. one of the speaker's earlier today passed the entities. a large partnerships. tell us what we should be worried about. >> there is no doubt that the corporate income tax is a rickety structure at this point. it is coming about because we are in a world where capitalism is increasingly mobile and we have this boundary around corporate income taxes based on natural boundary and there is tension contained in that phenomenon. there is dramatically different perspective about where the
move. the republican party seems much more interested in a territorial system where you are taxed on the profits that occur with in the united states in the democrats are worried it creates larger incentives for transfer pricing had love getting your profits overseas. that is a fundamental divide. in addition, what marty was suggesting is also in play. a larger share of total activity has been occurring in non corporate settings, businesses that are not subject to the corporate income tax. that is where you also get into other related issues, including the carried interest debate. a lot of those funds are flowing through structures that are not corporations.
that will be one of the subsidiary issues in play in this tax debate. >> you raise the corporate rate, if you lower the corporate rate to 28% and raise the personal rate to almost 40%, you create an incentive to go back to what people did before and figure out how to incorporate all their activities and get the lower rate. >> have you heard a good idea on the table? is that something that should even be pursued? i have heard republicans say they would be willing to go further on revenues if you can guarantee the small manufacturer down the street, it hit hard with a higher tax rate. >> you mean somebody who is already a corporation? >> somebody who is not a corporation. >> whatever rule there would be for forcing entities to become sea corporations, you would put aside a factory in.
if you are less than so much in revenue a year, you are not required to do it. if you are very large, you may be forced to file as a c corporation. >> what are the pitfalls of that? >> it is always problematic when he have arbitrary threshold. the optimal way to deal with this is how the tax system be neutral across organizational structures. set up your taxes to collect enough revenue. the small business discussion is -- a lot of tax policy discussions have a low ratio content to rhetoric.
the small business one is particularly bad on the ratio. >> separate fact from fiction for us. >> i am a small business. i did not feel like that makes me a small business guy. i have a day job. that data that you get are such that you read a lot of people like that who have a second home that they rent out. when you want to think about this for real, you have a district that out -- to strip that out. that is a real fact. most of the activity is multinational. a lot of the attention at that level is really about territoriality vs world wide taxation. >> the surprising thing about this territorial question about whether we should tax american companies in overseas profits when they bring back as if they
had been earned in the united states but give them a credit for what they paid in taxes abroad, we are the only country that does that. the other major investor countries around the world also that what you earn abroad, if you want to bring it back into your country, you pay a small tax may be 5% are something like that. the argument that somehow that is going to lead jobs to go someplace else should be as relevant in those countries as it would be in the united states. 27 other oec countries have figured out how to live with that. i'd not know why they are so much smarter than we are that we cannot prevent that from happening. >> they say this will not be productive for the economy.
>> there are a couple different opponents. apart from the employment dynamic, the larger concern is transfer pricing and artificially manipulating where the profits are occurring to escape taxation. >> why are we not better at catching more -- >> we have more [indiscernible] states within the united states have faced this problem for a long time. the all have individual income- tax is. corporations can move across different datelines. each state is the equivalent of the problem that we are facing on a global basis. the way they have attempted to deal with that is to take the things that are the hardest to manipulate, to think like sales.
it is much easier to manipulate higher profits occurred in your sales. on a national basis, if x sales are in the u.s., x percent are taxed in the u.s., period. ten% of your global sales and to the united states are taxed. >> what is wrong with that idea? >> i would have to look at the arithmetic. what we are doing now is in the face of what every country does. it provides very strong -- american corporations probably
have something close to $2 trillion abroad in funds that they do not want to bring back. they will instead find ways of buying companies abroad are opening new plants abroad because the penalty for bringing it back is often high. if our corporate income were down, the penalty would be less. we want to somehow get around that said they feel free to bring it back. >> what is your take on the issue and is there a windfall coming back to the united states? we have had a lot of business folks say we're going to put this money to use if you drop this and we can repatriate this money. >> temporary repatriation. the economic studies suggest and has little to no impact on observable economic outcomes.
abbas just the evidence is it would not [indiscernible] the arguments are so much stronger. the world of change over the last two decades. as competition has grown abroad. and as our tax system has become increasingly out of whack. the structure of our system is different from -- for most of our competitors. there is a good argument you can make that be more like the norm of our major competitors would put us in a better competitive situation. rex i want to get your take on some ideas that have been put into the mix that are outside the box. given this is a full reassessment of the american tax code that we are told about to take place, the carbon tax.
consumption tax. other ideas outside the box that you think should be part of the conversation. >> i think both a consumption tax and carbon tax have desirable features. it is just the air not likely to happen or the next 36 months. to start with a carbon tax in particular, unless you're going to completely denied the probability that we will face increasing risk from carbon emissions, pressing carbon strikes me as a step to get the behavioral change and the technological innovation we will need to adjust and adapt to what we have already done. a carbon tax also raises revenue in a way that could be used in different forms. it has an additional benefit
associated with it. i am in favor of it. i do not think it is remotely plausible within the narrow political discussion we're having today. >> we start seeing gasoline prices coming down because the price of oil starts to fall because of all the activity producing in this country, maybe that will be an opportunity to increase the federal gasoline tax. with 50 cents a gallon federal tax. >> the only problem is from a climate perspective, transportation and gasoline is a small share of the problem. the problem is really in the energy sector. without a carbon tax, you're not directly getting at that. >> i think the carbon tax makes enormous sense to do with the environment impact of energy use.
you can design one in a way that does not cause too much harm for american industries that compete with folks abroad. consumption tax, there are things you can do to treat the income tax to make it look more like a consumption tax. >> i want each of you to give me your thoughts at the end of the day, what do you think the tax code will look like with his conversations between the cop -- between the president speaker boehner are done? >> i think we will have slightly higher marginal tax rates on some high-income tax -- and these 1 high income tax payer. i think there will be a variety of tax exclusions and deductions that are scaled back modestly. >> if scaled-back means capped in some way, i agree completely. rex i think we will see some of those things will back.
the top rate will be either 39.6 or 35. it will be somewhere in between. >> we have some common ground here among our economists. thank you, a gentleman for joining us. thank you all. i appreciate the peterson foundation for allowing me to participate. >> i remember in a low price when and at the university of chicago -- a noble peace winner at the university of chicago. he used to say if you have no alternative, you have no problem. i thought about the alternative of delivering what i am sure you would love to hear, a 30 minute lecture by me deliver charismatic lee, of course. or simply saying thank you very much. thank you and goodbye.
[captioning performed by national captioning institute] [captions copyright national cable satellite corp. 2012] >> tonight, live coverage as ted koppel talks about the future of network news. he is interviewed by a former cbs reporter. the commuter caters takes a look at 30 years since the breakup of at&t. c-span 3 has a discussion on global pandemic prevention tonight at 8:00 eastern on the c-span networks.
>> her how does one adequately express his feelings about a special friend? when that friend is also a world by con howe, a national hero of unimaginable proportions. and a legend whose name will live in history long after all here today will be forgotten. fate looked down when she chose meal to be the first to venture to another world. and have the opportunity to look back from space at the beauty of our own. it could have been another. but it wasn't. and it wasn't for a reason.
no one could have accepted the responsibility of his remarkable accomplishment with more dignity and a more grace than neil armstrong. he embodied all that is good and all that his gray about america. >> more for the memorial service of neil armstrong thanksgiving day at 10:00 a.m. eastern. the behind-the-scenes look at life as a teenager in the white house. and how scientists are using game skills and game theories to solve more problems. >> chinese leadership appointed a new general secretary of the communist party last week. he will be joined by six new members of the standing committee. the brookings institution hosted a discussion today with analysts and scholars of what the
leadership change means to the u.s.. it is about an hour-and-a-half. >> good morning and elcome. , i amnathan pollock delighted to have all of you here for what i think is going to be a most revealing set of events. less than two weeks ago, the united states and china culminated two very different political process these through which the leaders of the two countries were either elected or selected to serve. in the u.s. case, it was a very public and openly fought processing resulting in president obama's reelection for a second term. in the chinese case, the decisions were made behind
closed doors and by non- transparent means. resulting in the appointments of senior leaders of the eighteenth party congress of the chinese communist party, the new general secretary of the chinese communist party as well as chairman of the military commission. this morning, we plan to review the political things we have observed in both systems, asked what they can foretell about the future political and economic directions in terms of debate in both countries. some of the major challenges that i think confronted both leaderships, and assess the possible implications for u.s.- china relations and east asia as a whole. our focus will be much more of the chinese side of the story. i think that this reflects the
enormity of the challenges both internal and extern all that china confronts. the extent of leadership turnover in china, the question of whether new leaders will follow an old script or whether they will pursue very different paths than their predecessors in office. at the same time, the united states confronts prodigious challenges of its own. even as president obama must replace many of the lead officials that have been responsible for the formulation of u.s.-china policy during the first term. the questions, some of them are quite obvious but it is important to state them at the outset. should we anticipate continuity or discontinuity in the bilateral relationship. how will leadership seeks to protect and advance their interests? will this reinforce or undermine
the capacity at the incentives of both leaderships to cooperate on international issues? and what are the potential consequences if there is increased stress and additional fault lines introduced into the bilateral relationship? what should we be looking for anticipating in the weeks and months ahead? i am joined this morning by three of my colleagues from the china center and by distinguished experts. they will respond to the presentations by the panelists at a moderate the ensuing discussions. we will try to allow for as much time as possible to get questions from the audience. our opening panel will address chide of's new leadership and their prospects. i am joined by a senior fellow
and director of research at the thornton center. the senior fellow at past director of the center, and the former u.s. ambassador to china, director of the kissinger institute at the woodrow wilson international center for scholars. and this afternoon, allen from the east-west center. sorry, the stimson center. since the presentation involved some slides, we will let him go first. and the rest of us will join him on the stage. the floor is yours. >> thank you, jonathan. i am honored to speak to you and
with the ambassador whose writings have profoundly shaped by writing on the chinese policy over the years. in my presentation, i will cover three aspects. first, the scale and the scope of the leadership change. second, the main characteristics of the new leadership, by looking at korea, japan, educational background, and certainly, i will discuss what i believe are the main issues emerging from the party congress and the new leadership. first, the scale and scope of leadership change. this is an overview that i completed a couple days ago, he lifted the six major organizations that were elected or selected in the aging party congress. our new members, the first
policy, there are 376, 240 of which are new members. it is about 64%. there is a difference in the inspection commission. that is about 77%. and the secretary organization in charge of affairs, a very important organization, 86%. in the powerful power bureau, 15 are new members. in the standing committee, 7. and also for the other members, seven are new. if you consider the military
members ha, the percentage is 70%. this is a look at the previous party congress, 64%. the second highest 25 years ago. the chinese communist party, the internal turnover rate is quite impressive. and the european parliament members. we will look at the institution noerm and laws. will also add my criticism. it is by and large second piece for transitional power.
also, some of the major laws follow the age limit. in the previous party congress, it's high. there is a reason that bureaucratic representation, i have spent three days calculating these numbers. of the 62 leaders, how the provincial leaders, 31 entities, each have two people. except the party secretary at the party governor. each have three members.
every major minister, there are four members, for others, there are two members. also, there is thare more candis than seats. it is about 10% more candidates on the ballot. 10% are eliminated. these people, including the minister of commercealso, theree supervision rising star, a very powerful woman. some people are not of the ballots, including the governor. and also very powerful military figures that raised some of the
concern and the criticism for the army. certainly, the most dramatic -- but he could not make to the central committee. i think the most important development is stepping down as chairman of the cmc. we can't understate the significance of that development because they are surrounded by two parties. by stepping down from that important position, it really consolidates the relationship of the party, the army, and the state. i also should say that some of the elections, it is not new.
the difference is probably increasing 1% or 2%. 25 years, only 1%. this is the top seven, the lucky seven. several things are interesting. at one is the age. five years ago, they were members of the standing committee. five years later, they are still. that means there will be a major change. seven, the lucky seven. that will probably start immediately. secondly, the opposition. all of them are very much already confirmed, but it is unclear whether they will continue over the use of the vice president of the party.
beijing said that they did not make the standing committee and will be vice president of the prc. we do not know. but all other are known. that list is not balanced. we divided the camps. one core group is -- [indiscernible] many people in hong kong believe he has an affiliation, but he is even closer. that is the main issue of the media and public reaction focused on that. bureau, the membersea
are very much decided although there are still some changes in the state member share, etc.. the camp actually had more seats. it is more even. in that level, you see the balance. this is the new secretariat, in charge of the daily events. the propaganda, they are being counted as generally replacing them. he was a former director, and
she is the no. 2 person in the discipline commission. it will be in charge of ethnicity and religion. ec more emphasis, they belong to the united front. the least four members of the communist youth league start their career. as i mentioned, half. and also for 30 years in the fleet, the secretary hires up. this is before the party conquest, talking about the military commission. seven of them retired, but the
opposition has a difference. it is not as people predicted. these other members, all seven have two or three steps of promotion. they were promoted through the vice chairman. he will likely become the minister of defence. and these are the other important positions in the military. there are other new members, 10 military members, seven of which are new. like the composition, it will not be announced, there are
still some changes. most of the rumors have different versions. the vice premier in charge of agriculture, as well as the other one replacing liu yandong. and the wang huning state councilor, there are rumors that he will take [indiscernible] military, d.o.d., state councilor, and chief of staff. it will also be minister of the
police. this is a surprise, i still have difficulty understanding if he will replace [indiscernible] usually, it is also from propaganda. this is a big supply. the policy apparatus [indiscern] makes it short-lived. but still, there are members of the central committee that will become the state councilor. it is unclear. previously or still currently the treasury department had. and peng qing in charge of hong kong affairs. the financial teams, this is not
the full list. but there are more important figures. [indiscernible] she has a nickname of china's larry summers. i do not know if that is good or bad. she is quite brilliant. and there is the minister of commerce. li wei, also making the fourth member of the central committee. these two from the research center, how they will move to external affairs. they are very limited in the high level. of the central committee. this time, the same.
two people have visiting experience and one overseas, studying in iowa. another person who spent one year in the uk. that is yet. maybe another location, i will release my report. at the high level, it is quite limited. very quickly, person who spent e year in the uk. the first year that korea had, this is about 25 members of the foreign bureau. actually, 19 of them, 76%, three quarters has problems with the party secretary. that is very important. so still, leadership is the main
path. second, the rise and decline of technocrats based on my previous study early hot about these leaders. you concede the home secretary government in 1988. 1982, i wasn't here. but 1987 increased dramatically, about 70%, i'm sorry. this decline is very clear. the red color is the standing committee, the blue color is the party power. the fourteenth party congress and the sixteenth party congress, the members are all technocrats, 100%. but the decline of the party congress, and many others
injured and declined. this time, this person as a technocrat. we really see a dramatic decline of technocrats. this is probably for most of the western audiences, not a big deal. but in china, it could be sensational. looking at these degrees, most of the advanced degrees, 88% -- only two really finished their masters degrees. what is surprising is the
undergraduate level degree. it is a meritocracy that could be a serious criticism. if they can prove that capacity, i guess there will be some criticism. the most important fishing is about the rise of precincts. 14, 15, 16, 17, 18. this is the highest ever, 57%. [indiscernible] it reduces the percentage.
still, it is unprecedented lehigh. it is very critical about the corruption. mainthere aren't the issues emerging from the party congress. for many observers, it is the disappointment that they did not adopt more candidates than seats in the high level of the policy. they discussed that, but imagine if they introduced that mechanism. it really gives them a new source of legitimacy and a new source of mandate. but unfortunately, that did not happen. only a few will be eliminated, but that was because of people
who that resisted strongly. in that regard, it is a very big disappointment, an opportunity missed. and broken in the highest level, it would be very costly. if they had won a lot of seats, they would pay a huge price in the years to come. and certainly, it is good news because previously we criticized these two factions. sometimes the deadlock could not really move on economic and foreign policy. most of them are capable. the financial economic sectors in the coastal region, that is very good news back and review some of the policy deadlock.
finally, they could not make the standing committee. and because of a lack of real direction, political reform was delayed. it tends to push for economic reform because -- now there is an opportunity to prove that they are capable. it might up with their confidence, but we know that it will require political reform, serious anti-corruption. thank you very much. [applause]
>> let's follow with some additional takes on the 18th party congress. i keep getting up here thinking there is nothing at, given the scope of his remarks. i will cover some of the same ground from a different angle. first on the congress itself, i thought this was not a very good show. it was divorced from public view, inviting social networks, and i was in beijing during part of the congress talking to everyone. they wanted popular ridicule on how it was being conducted.
until the very last when through, there were of the revelations, going back to last spring, it continued right up to the eve of the congress. the final choices, i would argue, were not driven by proven capability. all of these people at the top, obviously, have a lot of capability. but it is not easy to make the argument that those that have demonstrated the greatest capability and proper management and executive initiative and so forth were the ones that made it on to the standing committee. overall, i think it was highlighted and symbolized how outdated to many aspects of the political system have become given the political realities. there were some silver linings in the cloud. let me highlight the ones that
he indicated, and also add some to the list. the standing committee was reduced to seven members, i regard that as a good thing. it increases the chances of getting to make serious decisions. i agree very much with the willingness to give up his position as head of the military commission. it resolved the anomaly with several precedents in china for party secretary and president. again, we highlight the rules and continuity that you generally see. age limits weren't here to, and the notion of having more candidates than positions for the central committee did have some consequences and was a policy that was continued from the past. albeit not expanded.
the major programmatic document for congress that was given at the opening session, it was overseen over a set of months. as was noted, the report gave strong endorsement of continuity and the accomplishments of the past five years, not surprisingly affirming that he had done a very good job all along with his colleagues. but there are a variety of lines in paragraphs 3 of the report that can be used by the new team if they wish to -- or wished to do so to pursue some real departures. we have seen this before where what seems like an overwhelmingly conservative document has a few things in it that are retrospective that
provide justification for legitimacy of significant departures. i would note a strong endorsement for the separation of government from enterprise. it is always mentioned, but this time i really got a very strong plug. it is a very important thing for them to pursue, the notion that everyone is subject to the law, regardless of the level of political position. an independent judicial system, so forth. a number of things that could be run with even though the report seems to be moving in the opposite for a different direction. all of those things are elements that are positive coming out of this conference. more mixed was the fact that while they are appropriately and understandably had a major focus on corruption and the need to
deal with its. they strongly said it was the party that has the problem and it is up to the party to fix it, that they are not going to go outside of the party for any kind of independent judicial or other body. they will rely on a corrupt party to clean up its own mass. i think that is unfortunate because i don't think it has a very substantial chance of success even with someone very capable leading the effort. within a very constrained set of choices, if you look it the rules of the game in china, they decided to select, in addition, the five oldest people that were eligible. given my age, i think it was a wise decision. i would like to see that precedent, and even older would be a little better. but what this does is set up a
major transition five years from now. you can never be sure, but there is a good chance that others will have a much greater say in who comprises the rest of their team. there are only eight people they could choose from given their rules and they systematically went for the five oldest. this showed the partial institutional as asian of the system and the sharp limits on that institution was asian. --institutionalization. we will make some additional judgments based on those eight. they are as follows. first, there was extremely widespread need for reforms.
the recognition is not only in terms of social tensions, of which there are many, but also the analyses by key people in the security area and so forth. there is great pressure inside and outside for major reform. reforms need to be both economic and political. all of the major economic and social problems, such as inequality of wealth, overreliance on exports, land seizures, corruption, it results from how the political system currently functions and not solely from economic policies. political reform need not move
toward western-style democratization, but failure to implement other practices will sharply in his economic movement. in this regard, china is kind of like the united states. we have major decisions that we need to make the next two years. tene don't bend the curve, years from now, are in deep trouble. i would argue that the details are different but the fundamental reality is the same. they have to make major decisions to implement those changes in the next couple of years. or they are in deep trouble 10 years from now. he has not made his priorities clear either internally